Institutional investor the UPS Group Trust has purchased about $200 million of real estate fund assets on the secondaries market during the past two years, according to Greg Spick, UPS portfolio manager of real assets.
UPS considers itself to be opportunistic in the market and is interested in buying single fund assets, rather than entire fund portfolios.
“We’re happy to work with sellers to provide liquidity and portfolio management solutions, but we want to be careful that we aren’t just taking over a problem,” Spick said.
About 75 percent of UPS’ real estate secondaries activity is focused on the US, although it follows a flexible investment strategy to execute global opportunities.
However, Spick added that real estate secondaries aren’t as good of an alternative as they once were, because there is greater demand from other buyers for portfolio sales, which fetch premium pricing compared to one-off transactions.
“The risk premium that has been historically priced into the real estate secondary space is decreasing due to increased interest from new buyers,” Spick said. “There may be more price-efficient ways to get exposure to real estate than traditional real estate secondary purchases”
UPS has also considered engaging in the real estate secondaries market as a seller, but the fund has been unable to assemble a portfolio of legacy funds for what it considers the right price.
UPS is also active in the private equity secondaries market, though real asset secondaries opportunities outside of real estate are on the trust’s radar.
“The general industry consensus has been there may be fewer buyers in real asset secondaries outside of real estate; however, we have not yet found opportunities where we can meet our return expectations.”
UPS manages the funds of four pensions on behalf of its US employees. The trust has roughly $30 billion of assets under management.