While at ADISA’s 2024 Annual Conference & Trade Show last week, Kevin Gannon, chairman of investment banking firm Robert A. Stanger & Co. Inc., likened the evolution of alternative investments to plopping a New York City-born gentleman into the wilds of Tanzania’s Serengeti. The environmental changes are stark and keep you on your toes.
Money flows to where the highest yield is, Gannon presented, which is why we’ve seen increased redemptions among non-traded real estate investment trusts in recent years. With REITs typically paying annual dividends in the 5% range, investors have moved their capital into business development companies and private placements, which often currently pay annual distribution rates approaching (or in excess of) 10%.
“Retail investors have a great desire to time the market, and yield dominates. It always has,” said Gannon at the Alternative & Direct Investment Securities Association’s annual meeting in Las Vegas. Due to such factors as state concentration limits and the expense of Blue Sky requirements and other regulatory hurdles imposed on publicly registered securities, “private placements are becoming a major force in the alternative landscape.”
Ares Real Estate Income Trust and Ares Industrial Real Estate Income Trust Inc. – both monthly net asset value real estate investment trusts sponsored by Ares Management Corporation – closed their public primary offerings July 2, 2024, and commenced perpetual private offerings of multiple classes of common stock, as previously reported by The DI Wire.
Regarding private placements, among others, Blackstone launched Blackstone Private Equity Strategies Fund, raising $3.3 billion since January 2024; KKR launched KKR Infrastructure Conglomerate Private Placement and KKR Private Equity Conglomerate Private Placement, raising a cumulative $9.4 billion since April 2023; and Blue Owl raised about 50% of capital in private placements, or $4.4 billion in 2023, in BDCs and real estate funds.
Whatever the preferred vehicle, the popularity of alternative investments among retail investors is clearly growing rapidly based on the amount of equity being raised by asset managers.
The top six fundraisers within the non-listed NAV REIT space were Blackstone Real Estate Income Trust Inc. with approximately $1.99 billion (34.4% of market share), Ares Industrial Real Estate Income Trust Inc. with $623 million (10.8%); Ares Real Estate Income Trust Inc. with $603 million (10.4%); FS Credit Real Estate Income Trust Inc. with $459 million (7.9%); Apollo Realty Income Solutions Inc. with $447 million (7.7%); and JLL Income Property Trust Inc. with $410 million (7.1%).
The top six fundraisers within the non-listed BDC space were Blackstone Private Credit Fund with $10.51 billion (31.3% of market share), Blue Owl Credit Income Corp. with $5.16 billion (15.3%), Apollo Debt Solutions BDC with approximately $4.9 billion (14.6%), HPS Corporate Lending Fund with approximately $3.17 billion (9.4%), and Ares Strategic Income Fund, and Oaktree Strategic Credit Fund with approximately $3.1 billion (9.2%).
Other news from the trade association’s meeting last week, as reported by The DI Wire: ADISA and The National Due Diligence Alliance, or TNDDA, announced that the two organizations will unite under the ADISA name. The groups are expected to officially join together after TNDDA’s November 2024 conference. The 2025 season will feature “TNDDA by ADISA.”
ADISA is a trade association serving the alternative investment and securities industry. TNDDA is a nonprofit trade association of independent broker-dealers, advisers, and family offices and a facilitator of the due diligence process for the alternative investment industry.
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