Liquidity crunch is stalling fundraising; hot sectors cool

In 2023, real estate investment trusts that were battered in 2022 could stage a comeback, making them a more attractive choice for investors, said Mathew Kirschner, portfolio manager, U.S. real estate at Cohen & Steers Inc.

“It comes down to what is being priced into different markets,” Mr. Kirschner said. “The REIT market … has priced in two things: the increase in interest rates” and the prospect of slower growth.

Going forward, REITs should again offer above-average dividend yield and long-term returns, he said. REITs also helps diversify investors’ portfolios with easy access to next generation asset classes such as cell towers, data centers and single family homes for rent, he said.

“Investors have access to a lot of different asset classes they can’t access elsewhere,” he said. Cohen & Steers had $29 billion of institutional assets under management in REITS and $3.9 billion in infrastructure as of Sept. 30.

Greg Olafson, co-president of the alternatives business at Goldman Sachs Asset Management, said that “without question” it will be more difficult to raise new capital. But, he agrees that the funds that will be raised will tilt toward infrastructure, credit and to a less extent, real estate, he said.

“Real estate will take longer to work through because it is a rate-sensitive product,” Mr. Olafson said.

While infrastructure, credit, energy transition and digital transformation assets will be affected by the economy, they are supported by “strong secular trends in an inflationary environment,” Mr. Olafson said.

Despite secular trends that support these assets in the long term, some of the hottest infrastructure sectors such as communication infrastructure, cell towers and data centers may continue to underperform in 2023, said Tyler Rosenlicht, Cohen & Steers’ senior vice president, a portfolio manager for global listed infrastructure and head of natural resource equities.

These are high growth businesses and rising interest rates have a greater impact than on slower growth…

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