Private Equity Fund Activity Expected to Rise Next Year

Private equity fund activity will likely increase next year. Low investor confidence in the public markets is driving an increase of investment in commercial real estate assets. In 2020, the trend will only gain momentum as investors are looking to place capital in hard assets.

“We believe private equity fund activity in commercial real estate is only going to increase during and throughout the coming year,” John Carrick, co-founder of Integrated Capital Management, tells GlobeSt.com. “Although public markets have certainly performed well recently, the lack of underlying fundamentals has eroded investor confidence over the medium to long term. Moreover, Integrated’s current investor base is primarily comprised of family offices, registered investment advisors, and other private wealth relationships that appreciate the ability to invest in a brick-and-mortar asset.”

As for where this capital will land in 2020, the trends are less clear. Integrated won’t be looking at broad asset classes in the coming year, but rather, will consider opportunities on a case-by-case basis. “At the recent PERE Americas conference in New York, investor discussion centered on asset class-based niche investment strategies and megatrends,” says Carrick. “Integrated, however, never invests based on headlines.  We have a comparatively modest amount of capital to invest, and we are able to put it to work in any asset class or geographic market across the country. This mandate affords us broad latitude and the ability to be hyper-selective. As a result, our underwriting is extraordinarily granular, and our investments to be in projects with accomplished sponsorship and a unique confluence of circumstances.”

The risk of a recession is also at the top of investors’ minds for next year. As a result, private equity funds will be focused on quality opportunities to hedge against the risk of a downturn. “Anticipating a market correction in the near future, and with a new emphasis on wealth preservation rather than creation, investors now appear willing to accept lower returns in exchange for less risk,” says Carrick. “That said, Integrated’s broad mandate and diversification strategy allow us to cherry pick opportunities offering superior risk adjusted returns. Additionally, Integrated may elect to further protect its equity position by utilizing less debt or by negotiating a more protective structure.  In any case, while we understand investors would like to put their available capital to work quickly, this is a time to be extraordinarily thoughtful as to investment selection.”