The Real Deal New York

Investors ditch hedge funds for real estate

Wealthy investors had 33% of their portfolios, survey claims
July 19, 2017 08:30AM

Bill Ackman and 787 11th Avenue

Because of geopolitical risk and high fees, investors are telling hedge funds thanks but no thanks. Instead, they’re putting their money into real estate.

At the end of the second quarter, wealthy investors had 33 percent of their portfolios in real estate, according to a survey by Tiger 21. Bloomberg reported that the average allocation in hedge funds by those who took the survey fell to a record low of 4 percent. The survey included Tiger 21 members whose assets range from $10 million to $1 billion.

“Our members are most comfortable with assets they can have direct ownership of. They can own a building or a part of a small company,” said Michael Sonnenfeldt, founder of Tiger 21. “When you have such a low ability to produce returns you go to income-producing assets.”

Last year and for much of this year, hedge funds have trailed the S&P 500. Things started to look up last month, when hedge funds gained .57 percent, according to a report by Preqin. Though the industry has seen eight consecutive months of growth, the increases in gains have been small. In September, the Wall Street Journal reported that the hedge fund slowdown was contributing to a drop a in rental growth and landlord concessions at office properties. [Bloomberg]Kathryn Brenzel