Real estate is particularly attractive after it returned an average of 14.1 percent last year for the funds, almost double their 7.4 percent target, according to a survey by Cornell University and advisory firm Hodes Weill & Associates published Dec. 2.
Sovereign investors were net buyers of $36.1 billion of real estate globally through Dec. 7, a 60 percent increase from 2014, according to data compiled by Real Capital Analytics Inc. Deals completed this year include the acquisition of Canary Wharf financial district in London by a venture including Qatar Investment Authority and the purchase of a stake in 11 Manhattan office buildings by Norges Bank Investment Management.
Hedge funds have been less successful in attracting money, according to Martin Visairas, the global head of capital introductions at the prime finance unit of Citigroup Inc. Allocations this year are “flattish to slightly positive” and it will be a similar situation in 2016, he said.
Kazakhstan is bucking the trend. It allocated more than $350 million to Grosvenor Capital Management, a fund of hedge funds, and money manager Hamilton Lane Advisors, Otemurat said.
The country also started to allocate money to hedge funds and private equity businesses directly, including Citadel LLC’s Kensington fund and Blackstone Capital Partners, he said.
“I have always thought about ourselves as a newly-born giant kid standing on the shore of an ocean of opportunities for the country, being afraid to make our first steps without breaking a leg,” Otemurat said. “Before you run you have to learn how to walk.”