Many alternative investment asset classes represented in P&I annual survey of the largest U.S. retirement plans exhibited growth in the 12 months ended Sept. 30. Among defined benefit plans in the top 200 retirement systems, energy and infrastructure investments had the greatest increases, up 40.8% to $32.1 billion and 24.2% to $28.7 billion, respectively, albeit from small bases. Growth rates for private equity and real estate equity in the survey period.

The US office markets will attract a solid amount of new SWFs from Central Asia seeking to increase their portfolio performance in tier one property markets in 2019. However many tier one markets are already showing signs of cracks and buyers are looking to insulate themselves from the downturn. Green Oak partners a New York-based PE firm has historically spent most of its capital in tier one New York, San Francisco, Los Angeles, and Boston, it will also target other major cities, including Seattle, Washington, and Miami. All are more likely to be resilient in a downturn than less populated areas states Soni Kasi General Partner”.

Also, look for private equity to move towards consolidation in 2019. In 2018 a total of 703 billion dollars of capital flow was committed to private equity which stands at 12 percent below 2017’s record of $800 billion. A review by PERE found that 2018 was the worst year for private equity capital raising in the last seven years. The trend for smaller PE firms will be co-investing in 2019. The US private equity manager is looking at core office, infrastructure, data centers, office, alternative assets, senior health facilities and e-commerce driven industrial. On average private equity returns 8.2 percent which outperforms equity indexes. The hybrid funds will continue to find investors; Apollo just raises 3 billion for its Value Fund a mix of equity and credit. Although capital inflows to CRE debt funds fell by 48% after peaking at $39 billion in 2018. Pension funds will be forced to allocated larger funds to private equity with global skills to meet benchmarks. However, with the scale of deal size private equity must look to global diversification in 2019-2021. This means China, India, Brazil, GCC global logistics and outbound markets east with transparent policies supporting foreign direct investment and financially integrated systems.

In 2020 -2021 Basar Global Group (BGG) sees REIT s as the primary global vehicle for smaller US funds to participate in global diversification of commercial real estate assets. REIT s can expand and diversify the investor pool.REIT’s can take advantage of the separate Global Industry Classification Standard (GICS) of real estate and help generalist investors to better understand the nuances of REIT’s performance, operations, and valuation. Companies can frame a targeted expansion strategy for generalist investors such as pension, endowment and foundation funds who have been traditionally under-allocated to REIT s but are warming up on REIT investments.

Further, the increased investor interest can particularly help smaller REIT’s gain exposure to more institutional investors, as the investors plan to expand beyond core markets in search of yield. For example Pension fund respondents to the Deloitte survey, plan to increase CRE capital commitment by 9 percent in the next 18 months, and a significant portion of this could be directed toward REIT s. Portfolio managers are able to use data insights to achieve geographical diversification by targeting investors from different markets and countries. REIT”s would also be a good partner for private wealth such as family office seeking CRE portfolio diversification. Blockchain will support dividend and currency transactions will be an “ideal use” of blockchain for REITs, “as are applications around securities, land deeds, voting, registries and identity management.” He notes that “the maximum potential of blockchain in REITs will be unlocked once the entire real estate life cycle is transitioned onto the chain.The REIT platform continues to expand in developing markets.