Institutional investors are increasingly reluctant to pour capital into property funds, as the pandemic has turned the sector’s investment cycle upside down, according to Savills group CEO Mark Ridley.
Speaking exclusively to City A.M., Ridley said during a wide-ranging interview that October alone saw the third highest level of monthly redemptions ever experienced by open-ended UK real estate funds.
“It is very polarised, clearly the pandemic has has made institutional investors very cautious. It is particularly difficult launching new funds, especially blind funds,” Ridley said.
Blind vehicles are funds for which the fund manager has the flexibility, usually within pre-negotiated parameters, to invest without approval from the investors involved. Large institutional investors, insurance companies and pension funds are increasingly unprepared to commit to such a structure, Ridley noted.
“Capital has been hesitant given the turbulence resulting from Covid,” he noted, although he did add that the market has seen some successful fundraisings, particularly for specialist funds focused on logistics, build to rent and supermarkets.
“At the moment we are seeing both domestic and non-domestic investors move to a risk-off strategy,” he concluded, adding that this favours well-let City centre offices, big logistics, datacentre, multi-family housing and “anything that has a health and science hook.”