ABANA is pleased to announce Marwan Azzi as its new Board Chairman! As a long-standing member of ABANA, first joining in 2013, Azzi has an impressive record of engagement with ABANA; attending over 50 programs and events, seven award dinners, and frequently hosting ABANA events personally. He has also been a regular financial sponsor to ABANA. He joined the ABANA Board in 2019 and has since served as the Board Secretary and a member of the Executive Committee.
Azzi is a Partner at Gibson, Dunn & Crutcher’s New York office and a member of the firm’s Private Equity Practice Group. His practice focuses on representing companies, private equity, and infrastructure funds, and management teams in global investments in the infrastructure space, including assisting clients with domestic and cross-border mergers and acquisitions, joint ventures, project development, co-investments, and other corporate matters. Azzi’s infrastructure experience spans the energy space (power generation, energy transition, and midstream), transportation, digital infrastructure, and social infrastructure in North America and Latin America.
Register Now: ABANA’s 2023 Holiday Reception!
Join ABANA at the Metropolitan Club on December 12th for our end-of year networking event that will mark the end of our 40th anniversary celebration.
ABANA’s 2023 Achievement Award Dinner honoring Chuck Davis
ABANA is delighted to announce this year’s Achievement Award Recipient, Chuck Davis, Chairman and Chief Executive Officer of Stone Point Capital. The event will take place on November 8th at the Plaza Hotel, New York City.
Chuck Davis is the Chairman and the Chief Executive Officer of Stone Point Capital, an investment firm based in Greenwich, CT, with over $45 billion of assets under management. Stone Point targets investments in companies in the global financial services industry and related sectors. The firm invests in a number of alternative asset classes, including private equity through its flagship Trident Funds. Stone Point also manages both liquid and private credit funds and managed accounts. In addition, Stone Point Capital Markets supports the firm, portfolio companies and other clients by providing dedicated financing solutions.
Before joining Stone Point in 1998, Mr. Davis was with Goldman Sachs for 23 years where he served as Head of Investment Banking Services worldwide, Co‐Head of the Americas Group, Head of the Financial Services Industry Group, a member of the International Executive Committee and a General Partner.
Mr. Davis is a member of the Board of Directors of AXIS Capital Holdings Limited and The Progressive Corporation. He is a former Chairman and former lead Director of the Hershey Company Board of Directors. Mr. Davis is also a current or former director of several portfolio companies of the Trident Funds, as well as several other publicly traded companies, including Marsh & McLennan Companies, Inc., Merchants Bancshares, Inc. and USLIFE Corporation. He is also a Founder and Co‐Chairman of the Fibrolamellar Cancer Foundation. Mr. Davis is a former member of the Advisory Board of Deutsche Bank, the Board of Overseers for the St. John’s University School of Risk Management, Insurance and Actuarial Science, the Board of Trustees of the University of Vermont, St. Michael’s College and The Boys and Girls Club of Greenwich, CT. In 2018, Mr. Davis was selected as one of the Financial Times “2018 Outstanding Directors.”
Mr. Davis grew up in Burlington, VT and is a graduate of the University of Vermont. He also holds an MBA from the Columbia University Graduate School of Business. At the University of Vermont, he was a two‐sport, all‐conference athlete and is an inductee in the University’s Athletic Hall of Fame. At Columbia University, he was elected to Beta Gamma Sigma, the academic honor society.
If MENA, then ABANA, or Else Indifference
June 20, 2023
Message from ABANA President, Khalid Azim on ABANA’s 40th Anniversary:
Over four decades, ABANA has harnessed the MENA’s crosscurrents of people, capital, and ideas to facilitate discourse, build bridges, foster innovation, and make a positive impact.
ABANA was founded forty years ago as the “Arab Bankers Association of North America” with a core mission of fostering professional exchange and promoting the business interests of the Arab and Arab-American financial community in the United States. In 1983, fourteen financial institutions and forty banking professionals became the organization’s inaugural members. Four decades later, ABANA has established itself as a unique forum for policy discussions, with a strong focus on connecting, inspiring, engaging, and informing Arabs, Arab-Americans and others who have an interest in the Middle East and North Africa (MENA) region.
The MENA region has a rich history with import and significance. In early human civilization, the fertile soil of the MENA region was the center point of human existence. Later, the peoples of this land fostered giant intellectual leaps in radical innovative thought and ideas in math, science, medicine, philosophy, art, architecture, poetry, and the very idea of time itself. Although, MENA is no longer the center point of the world’s economy, it still produces 3.8% of global GDP, and accounts for 5.6% of the total world population, and 5.2% of global trade. On a grander scale, the MENA region has a combined $1.1 trillion worth of FX reserves and produces over 35% of the world oil production and 22% of the world gas production1.
Today, significant investment capital is being managed within the MENA region and put to work in some of the most transformational industries on the planet. Not only are MENA Sovereign Wealth Funds being managed by savvy investors and industry practitioners, but they are also putting risk capital into tomorrow’s industries such as Sustainable Energy, Bio-Tech, Artificial Intelligence, Fin-Tech, Pharmaceuticals, Blockchain, Payments and e-commerce to name just a few. As MENA nation states accelerate economic and trade liberalization, along with incremental cultural and social reforms, a fast-growing young population see the world as a place to compete in racing to Mars, disrupting markets, or winning matches at the World Cup. For the financial services industry, this sets the stage for robust growth of advisory and capital raising fees in upcoming years. Saudi Arabia alone has launched $51.2 billion of investments led by local companies and its Vision 2030 plans are breathtaking in terms of ambition.2
There is also an unheralded resource in the MENA region, that is creating opportunity and driving change, the demographic dividend. This is a concept, as defined by the International Monetary Fund, in which a high fertility rate nation has a labor force growing more rapidly than the population dependent on it. It creates the scope for per capita income to grow and can lead to a more urban, modern, and industrial society, ceteris paribus. The experience of fast-growing Asian nation states (once referred to as “Asian Tigers”) over the last few decades demonstrated that this dividend period is quite long, decades in fact. Moreover, this phenomenon can be followed by a second dividend through capital and asset accumulation, which also fosters higher domestic savings rates. “In short, the first dividend yields a transitory bonus, and the second transforms the bonus into greater assets and sustainable development.”3 The implications in the MENA region are profound, because unlike the Asian Tigers whose economies were led by external investments, certain MENA nations have an abundance of hydrocarbon resources with large current account surpluses providing the resources to invest in the knowledge based sectors and skills necessary for the success of a modern economy.
These MENA cross currents are creating a vibrancy and energy in the region. This is fertile ground for an organization like ABANA, which centers itself on the very idea of connectivity and professional networks. In these past twelve months alone, ABANA has hosted program events on Fintech in the UAE, Revolutions in the MENA food chain, Saudi Women entrepreneurs, Hydrogen Energy, and a look at the Turkish economy in the aftermath of a devastating earthquake. Moreover, ABANA honored, His Excellency Yasir Al-Rumayyan, the governor of the Saudi Sovereign Wealth Fund and Chairman of Saudi Aramco, hosted Uber’s CEO, Dara Khosrowshahi at a private showcase for ABANA members; and more recently honored John J. Mack, the former Chairman and CEO of Morgan Stanley, in conjunction with the launch of The ABANA Foundation, which will provide scholarships and fellowships.
ABANA has made a difference. The difference is measured not only in years, policy forums, events, gala dinners, honorees, and financial resources, but through its human-to-human intersection and impact. ABANA has been able to demystify the MENA region, exploring it as a vibrant place for business and financial opportunity. It has also created a pathway for generations of Arab and Arab-American business professionals to enter the marketplace, to represent the communities they come from, to live up to the best version of themselves. When H.E. Yasir Al-Rumayyan spoke at an ABANA event, his remarks focused on a dynamic future and the importance of intellect as fostered through human capital to solve the toughest business challenges faced in the world today. When Dara Khosrowshahi spoke at an ABANA event, he spoke about humility and kindness in our interactions with colleagues and our community. When John Mack spoke at a recent ABANA Foundation event, he spoke about the importance of doing the right thing, even when doing so comes at a personal cost. Each of these speakers and the countless other ABANA speakers, board members, and other constituents showcase how ABANA makes a difference. It does so by building bridges, facilitating dialogue, and embracing excellence. Renowned Andalusian Philosopher and champion of reason from the 12th century Ibn Rushd once said, “Knowledge is a light that illuminates our darkness.” Ultimately, ABANA’s mission and purpose is to find, share, distill and warehouse knowledge and by doing so illuminate a region, and the humans inspired by that region, for the entire world to see.
1 Source: IMF and BP. 2 Bloomberg : “Saudi Firms Outline $51 Billion of Projects” March 2, 2023 3 Finance & Development, IMF, “What is the Demographic Dividend?” By Ronald Lee and Andrew Mason, September 2006
ABANA Honors John J. Mack, Former Chairman & CEO of Morgan Stanley, with its first-ever ABANA Legacy Award
It was an honor to celebrate the legacy and leadership of John J. Mack, Former Chairman & CEO of Morgan Stanley, last night with an incredible view of New York City at the Mandarin Oriental.
In accepting the first-ever ABANA Foundation Legacy Award, John Mack joined a fireside chat with David Rubenstein. He was introduced and celebrated by prominent Morgan Stanley alumni and industry figures, including Mayree Clark, Jerry Speyer, and James Gorman.
John Mack’s close friend and Duke University’s longtime head basketball coach Mike Krzyzewski “Coach K” also gave an inspirational talk about John’s many virtues and impact we all can have on one another.
The Chairman of ABANA, Amr Nosseir, in his welcome address talked about the core meaning of the word legacy, as leaving something behind for others, and how that has been the centerpiece of John’s life.
ABANA President Khalid Azim highlighted how guests’ generous support would uplift and transform lives through educational initiatives.
Proceeds of the event went to The ABANA Foundation, ABANA’s charitable arm dedicated to funding educational opportunities and career support programs for Arab-American, Middle Eastern, and American students passionate about the MENA region.
Save the date, May 8: ABANA to honor John Mack with Legacy Award
February 23, 2023
On May 8, 2023, the ABANA Foundation will honor John Mack, former Chairman and CEO of Morgan Stanley, with the first-ever Legacy Award, at the Mandarin Oriental in New York City. This award intends to recognize leaders who – over the course of their career – have made an extraordinary impact on the finance and investment industry and positively influenced the US Arab and Middle Eastern community. In accepting the award, John Mack will join a fireside chat with David Rubenstein, Co-Founder & Co-Chairman, Carlyle, to reflect on his own life and legacy. He will be introduced by James Gorman, Chairman & CEO, Morgan Stanley (via video), and Mayree Clark, Independent Director and former Morgan Stanley Executive.
Proceeds from the event will raise money for the ABANA Fellowship, through the ABANA Foundation, ABANA’s 501(c)(3) charitable arm. The Fellowship will sponsor rising young talent with a stipend for graduate studies along with access to all ABANA events and a summit designed to inform and connect these fellows to senior professionals in emerging industries.
For more details on the agenda, tickets, and sponsorship, please visit our event page. You can also make a direct donation here.
TheABANA Foundation
The ABANA Foundation is a 501(c)(3) charitable subsidiary of ABANA and was established to provide relief to the underprivileged, promote the social welfare and the advancement of education, and eliminate prejudice and discrimination, through scholarships and educational support, educational events, educational literature, and pursuing other charitable causes.
Seed-funding for the ABANA Foundation will be provided by proceeds from the 2023 ABANA Legacy Award Dinner honoring John Mack, former Chairman & CEO, Morgan Stanley. These funds will be used to institutionalize and expand the ABANA Fellowship Program as the newly christened John Mack ABANA Fellowship Program.
TheABANA Fellowship Program
The ABANA Fellowship was established nearly 10 years ago to support Arab and Arab-American MBA students in the US. Every year, ABANA selects a cohort of students who participate in a two-day program. The program includes meetings with leading financial institutions and ABANA Board Members, introductions to mentors, and opportunities to network with key players in the financial services and investment management industries. The fellows also participate in the annual ABANA Achievement Award Dinner and receive a one-year complimentary student membership and access to all ABANA membership benefits. Many fellows have gone on to find full-time careers through connections they have made through the program. Many also return as ABANA members on their own once their one-year membership expires.
Thanks to support from John Mack and proceeds from the Legacy Award Dinner in his honor, the ABANA Fellowship Program will expand on these roots.
Run under the auspices of the ABANA Foundation, the fellowship will target graduate students in their second year. It will have a competitive application process inviting students with a demonstrated interest in the Middle East and North Africa who intend to pursue a business or financial career to participate. The students selected will each receive a stipend to support their graduate studies. They will also be given ABANA memberships and granted access to ABANA’s network and all ABANA events. Most importantly, all fellows will participate in an annual summit designed to connect the fellows to senior professionals in ABANA’s network in finance and investing, private equity and venture capital, real estate, law and consulting, entrepreneurship, technology, and more. This summit will be hosted in New York City and the ABANA Foundation will cover all lodging, and food costs.
The fellowship is an opportunity for ABANA to give back to its community while maintaining links to its core mission and vision: bridging and empowering the finance community active between North America and the Middle East.
Gulf Creatives Conference (GCC) at Harvard 2024 – Shared by ABANA member
GCC Theme:In the spirit of collaboration, transcending disciplinary boundaries, and cultivating a harmonious exchange of ideas, GCC at Harvard 2024 proudly presents its theme for this year—”Harmony in Collaboration: Unleashing Gulf Creativity”
The conference will host guests and experts from the Gulf as well as participants from the US facilitating collaboration and idea exchange.
About GCC at Harvard
GCC at Harvard 2024 will foster collaboration and cross-disciplinary exchange among more than 100 esteemed speakers and more than 1,000 attendees guests in sports, arts and culture, business and innovation, nonprofit and public policy, healthcare, science and technology, and law.
It is the premier gathering for creative minds from the Arabian Gulf in the US, hosted at the prestigious Harvard University. We aim to empower and inspire Gulf creatives to drive positive change and shape the future of the Gulf’s creative ecosystem.
The conference will feature over 24 captivating panels, more than 5 engaging workshops, 2 concerts, multiple tours, a display of projects and initiatives, and numerous networking opportunities designed to inspire and connect attendees.
The Diwan and its Role in Orchestrating the Conference
The conference is organized by the Diwan, a student organization at the Harvard Graduate School of Education. The Diwan serves as a platform for experts, academics, policymakers, and students to discuss various subjects such as economics, social affairs, politics, business, women and youth empowerment, education, and other topics relevant to the Arab world.
May 10-12
The Diwan, A Student-run Organization at Harvard Graduate School of Education
New Job Opportunity at Wafra – Shared by ABANA member
Please send your resume to BDrecruiting@wafra.com with the subject line “VP/Director – BD”
Position: VP/Director
Location: New York
Reports to: Managing Director, Interim Head of North America
About Wafra:
Wafra Inc. is a leading global investment firm currently managing over $32 billion in assets and commitments across a variety of asset strategies. Behind our investment strategies are talented professionals, who bring expertise and experience to deliver strategic, reward-focused solutions. Wafra seeks to provide long-term investment return solutions that span not just years, but generations.
Department/Position Summary:
Wafra pursues excellence in all areas of its operations and activities; the Wafra Business Development team is no exception. Business Development is responsible for the firms’ fundraising activities, driving the execution of Wafra’s sales, client acquisition, and brand strategy and further developing new client outreach and relationships with existing strategic partners.
Duties and Responsibilities:
Raise capital from institutional investors including insurance companies, pension funds, family offices and corporations.
Manage and expand existing investors through communications and updates on existing portfolio and pipeline.
Build investor marketing strategy to build long term business relationships with key investor contacts.
Ensure an effective overall sales process, including both the sourcing of new relationships and cross-selling to existing clients.
Identify and develop relationships with prospective investors and help lead the firm’s efforts to expand its institutional relationships.
Requirements:
Undergraduate degree is required. CFA designation and/or MBA preferred.
Successful track record in driving new business development and raising assets from institutional investors, insurance, and other channels across North America.
Minimum 7 years professional experience in private equity/real estate and alternative investment fundraising experience gained at a multi strategy investment firm or placement agent.
Strong understanding of investment strategies, markets, products, and the competitive landscape.
Demonstrated strength at communicating and collaborating with colleagues on strategy, communications, and relationship development, always in the name of advancing the business and serving clients well.
Collaborative individual who will foster strong working relationships with portfolio managers and ICS teams.
Capacity to handle multiple tasks at a time with a strong attention to detail.
Ability to interact effectively and professionally with clients within the financial industry.
Entrepreneurial spirit and robust work ethic with the ability to independently devise and execute projects to completion.
Willingness to travel to create deep engagement and develop relationships with investors.
A good faith estimate of the Base Salary Range is: $140,000-$225,000 with the possibility for a discretionary bonus.
All duties and responsibilities of this role are expected to be conducted on-site at the Company offices, except where travel is required.
This description reflects management’s assignment of essential functions; it does not proscribe or restrict the tasks that may be assigned.
Arab Conference at Harvard – Shared by ABANA member
The Arab Conference at Harvard is a 3-day conference organized by Harvard students and alumni that invites leading figures in business, politics, healthcare, and pop culture to discuss key topics in the Arab World. The conference brings together over 800 – 1,300 Arab leaders, professionals, and students annually on Harvard’s campus.
Get ready for 3 days of insightful panels, fireside chats, and workshops with the region’s most exciting voices, tons of networking opportunities, and a fundraising Gala with the Palestine Children’s Relief Fund! Stay tuned for the announcement of this year’s exciting lineup on our Instagram!
Former speakers include Queen Rania, Khalid Al-Falih, Noam Chomsky, Tawakkol Karman, Tamim Barghouti, Marcel Khalife, Naguib Sawiris, Rashida Tlaib, the Hadid Family, Bassem Youssef, and many more!
EVENT INFORMATION:
🗓️ April 19-21, 2024
📍 Harvard’s Campus (86 Brattle Street Cambridge, MA 02138)
Global Institutions are Meaningfully Under-Invested in Infrastructure Relative to Target Allocations, Finds Inaugural Infrastructure Allocations Monitor from Hodes Weill and Cornell University’s Program in Infrastructure Policy
Institutions are under-invested by an average of 98 basis points as compared to target allocations, which should accelerate the pace of sector investments over the next several years
The Americas region is furthest behind, currently, 152 basis points under-invested with expectations to raise targets in 2024
Three-year average returns across institutions stood at 10.7%, exceeding target return levels by 141 basis points
Interest rates and market volatility were cited as top concerns for infrastructure investing
Infrastructure opportunities in North America are expected to lead allocations, driven by the Inflation Reduction Act of 2022
Energy transition is a core focus, with 40% of respondents indicating they expected to increase allocations to renewable energy and storage
NEW YORK (June 29, 2023) – While institutions have become increasingly cautious over the past several quarters in the face of heightened market volatility and denominator effect concerns, sentiment towards private infrastructure remains relatively strong and institutions are still trailing their infrastructure target allocations, according to the inaugural Institutional Infrastructure Allocations Monitor released today by Hodes Weill & Associates and Cornell University’s Program in Infrastructure Policy. On average, global institutions are under-allocated to the asset class by 98 basis points relative to their targets, supporting expectations of increased capital flows into the sector.
Overall, 60% of respondents are under-allocated to infrastructure, with Americas-based institutions the furthest behind at an average of 152 basis points below targets. They are followed by institutions in the EMEA and APAC regions, at 82 basis points and 42 basis points under-invested, respectively. Even considering sizeable infrastructure programs such as the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA) that were signed into law in the U.S., governments across the globe remain limited in their ability to close what has been an increasingly widening infrastructure investment gap. Consequently, there is a growing opportunity for private sector involvement that aligns well with the under-allocation of institutions globally.
The 10.7% three-year average return across all institutions exceeded target return levels of 9.3%, reflecting both the critical nature and resiliency of infrastructure in what has been a turbulent period that has been complicated by COVID-19, rising inflation and interest rates, heightened geopolitical tensions, and supply chain pressures. When looking year-over-year, infrastructure portfolios generated an average investment return of 14.4% in 2022, representing a significant rebound from performance in 2021 of 6.9%.
Key to many investors’ desires to add resiliency to their portfolios is their ability to gain exposure to higher-returning infrastructure strategies within their private markets allocation, providing similar returns to other alternatives with less correlation to short-term market volatility. As such, institutions are gravitating towards higher-risk core-plus and value-added infrastructure strategies, while a rising interest rate environment has posed a challenge to the relative attractiveness of super-core and core strategies and driven an expected decrease in investments in these strategies for the foreseeable future.
Mark Rudovic, Principal and Head of Real Assets at Hodes Weill said, “Despite systematic risk in the form of the denominator effect plaguing private markets allocations over the last 12 months or so, sentiment towards infrastructure amongst allocators remains positive given the resiliency of performance through a rising interest rate environment, heightened geopolitical tensions, high inflation, and global supply chain challenges impacting all verticals of infrastructure. Infrastructure remains a particularly favored asset class for institutional investors, and the inflationary risks affecting other asset classes drive capital to infrastructure as a safe haven, as asset owners are often able to pass through rising costs, demonstrating resilience in the face of a slowing economy.”
When evaluating performance based on the size of the institution, there was a marginal difference in the three-year average return, demonstrating the role infrastructure can play as a portfolio stabilizer for institutional investors of all sizes. This return performance could also explain why 43% of institutions expect to increase their target allocations to infrastructure over the next 12 months. However, it’s important to note that infrastructure is a relatively nascent sector for institutional investment especially in the United States, with some institutions just now setting formal allocation targets to the asset class. With this in mind, the expected increase in target allocations could be a conservative data point, especially if performance within the asset class continues to hold up throughout 2023.
When asked to which regions investors expect to allocate capital for infrastructure investments, roughly 34% expect to grow allocations to North America, followed by Europe at approximately 21%. Expected growth in North America could largely be driven by the Inflation Reduction Act of 2022, a first-of-its-kind legislation and the single largest investment in climate and energy in U.S. history. Interest in North America is strongest from EMEA investors, where approximately 44% of respondents indicated a desire to invest more capital in the region.
Of the subsectors within the asset class, institutions indicated that they have the greatest appetite for digital infrastructure, and the proliferation of cloud-computing, enterprise modernization, advancements in AI applications, and mobile apps has underscored an accelerating need for expanded digital infrastructure globally. Despite this rising appetite and need, digital infrastructure represented just 8% of the capital raised by sector-specific funds in 2022. One potential explanation for the discrepancy could be the lack of historical exposure to the asset class as compared to other sectors. The lack of investment through sector-specific funds could also be an indication that investors are comfortable accessing digital infrastructure exposure through diversified strategies.
Renewable energy and new energy transition infrastructure are also top destinations for institutional capital, with 40% of respondents indicating intentions to increase energy-related allocations to renewable energy and storage, which were responsible for 55% of the $40 billion raised for sector-specific infrastructure in 2022. This indicates a preference for specific funds given the critical need for domain expertise in the renewable space. A similar number of institutions surveyed – 39% – reported an intention to increase investments in new energy transition, which includes green hydrogen and carbon capture, among other asset types. Conversely, roughly 76% of those surveyed noted they are either not investing or investing less capital in oil and gas, though institutions in the Americas predicted a modest 7% increase in investment to the asset type.
Dr. Rick Geddes, Founder and Director of Cornell University’s Program in Infrastructure Policy, said, “Broadly speaking, the results of the Inaugural Infrastructure Allocations Monitor from Hodes Weill and the Cornell Program in Infrastructure Policy indicate that institutions have a growing preference for nascent but stable markets with significant expansion potential. The finding that North America is far behind in terms of under-investment suggests that institutions are looking for markets with well-developed contract enforcement, much room to grow, as well as established managers. That is consistent with the investment need in those markets, where aging infrastructure suffering from years of deferred maintenance stands to benefit from large infusions of fresh public spending.”
63 institutions from 16 countries participated in the inaugural survey, representing aggregate AUM exceeding US$6.8 trillion and portfolio investments in infrastructure totaling approximately US$325 billion.
Institutional Target Allocations to Real Estate Remain Flat for the First Time Since 2013 while Conviction in the Asset Class Increases in Anticipation of Attractive Buying Opportunities, Finds Hodes Weill & Associates and Cornell University
Average target allocations remained at 10.8%, marking the first time in the survey’s history that target allocations did not increase
While the majority of institutions are at or over target allocations to real estate, portfolios are beginning to come into balance as the denominator effect abates
Anticipating a more favorable investment environment, investor sentiment has rebounded to its second-highest level since 2013
After retrenching and turning their focus to domestic strategies, institutions are planning to increase cross-border investments, with the U.S. remaining the preferred destination
NEW YORK (November 2, 2023) – Amidst the backdrop of a tumultuous economy, rising interest rates and frozen transaction markets, institutional target allocations to real estate have remained flat for the first time in 10 years, at 10.8%, finds the 11th annual Institutional Real Estate Allocations Monitor, published by Hodes Weill & Associates and Cornell University’s Baker Program in Real Estate. Institutions have chosen to spend 2023 focused on managing their existing portfolios in an environment in which investors are waiting for valuations to find a bottom. While the survey finds that institutions expect to hold target allocations steady in 2024, investors believe the next few years will prove to be good vintage years to capitalize on expected dislocation and distress.
The majority of institutions are at or over target allocations to real estate, with nearly 40% of survey respondents reporting overallocation to the asset class by an average of 200 basis points, in comparison to 32% of institutions in 2022 by an equal margin. However, while the denominator effect has been in play since early 2022, there are signs it is beginning to abate, bringing portfolios back into balance. This can be attributed to a rebound in public equities from a low in September 2022 combined with write-downs of private real estate portfolios. The survey notes that there are early signs that institutional portfolios have been trending towards allocation targets over the last several quarters, with institutions responding to the survey after September 1st reporting being under-allocated by an average of 70 basis points.
The “Conviction Index” in this year’s survey, which measures institutions’ view of real estate as an investment opportunity from a risk-return standpoint, increased from 6.0 to 6.4 – its second-highest level since the survey launched in 2013. The rebound in sentiment can be attributed to increasing optimism that compelling buying opportunities will emerge as valuations find a bottom. To that end, investors are starting to deploy capital to select opportunities after an extended period on the sidelines, though they remain cautious, citing concerns relating to further devaluations as interest rates remain higher for longer, and uncertainty regarding macroeconomic fundamentals, including the potential for a recession.
In 2022, institutions saw real estate portfolio returns moderate to 9.5%, following an exceptionally strong performance in 2021 when institutions reported the highest returns generated over the past decade, at 17.1%. This return is consistent with historical averages and is 100 basis points above institutions’ average target return of 8.5%. Survey respondents expect further declines, and potentially negative returns, in 2023 as portfolios continue to take write-downs.
Douglas Weill, Managing Partner at Hodes Weill & Associates, said, “While target allocations are flat year-over-year, this follows ten years of increases totaling 190 basis points, which represents an increase of over 20%. Moreover, the industry has consistently outperformed relative to target returns over the long-term. Despite short- to medium-term macroeconomic disruption, investor conviction in the asset class remains near its high, and the asset class continues to play an important role in institutional portfolios alongside other alternative allocations including private equity, private credit, and venture capital. From a macro perspective, the looming wall of debt maturities may be the catalyst for valuations to find a bottom, encouraging investors to return from the sidelines.”
Institutions in the Americas expect to hold target allocations flat over the next 12 months, and EMEA-based institutions, with the highest target allocation at 11.5%, indicated an intention to lower target allocations by 20 basis points. A substantial portion of this decline is out of Europe, where nearly 20% of institutions report an intention to lower target allocations. The APAC region was the only one to report an anticipated increase, with target allocations expected to rise 50 basis points from 9.5% in 2023 to 10.0% in 2024.
The United States remains the preferred destination for capital allocations from both North American and international investors, with 89% of institutions reporting they are actively investing in the region, followed by 73% in Continental Europe, 65% in the United Kingdom, and 41% in Asia. Approximately 45% of institutions expect to invest the same amount of capital in North America in 2023 (up from 38% in 2022), while 23% expect to invest more capital in the region. Australia also saw a marked increase in institutional demand year-over-year, from 30% to 41%, matching Asia in terms of investor appetite. Notably, after retrenching and turning their focus to domestic strategies given the uncertainty in the market, institutions are planning to increase cross-border investments.
Despite a sluggish fundraising environment that has persisted since 2022, more than 80% of institutions report that they are now actively considering investments in funds. Faced with overallocation, institutions report that a majority of investments (64%) are expected to be allocated towards existing manager relationships, and only 11% of institutions are willing to invest with first-time fund managers, down from 16% last year.
As it relates to risk preference, higher-return strategies continue to be the focus, with over a quarter of institutions expecting to invest more in both opportunistic and value-added strategies. Investors are also showing an increased appetite for credit strategies, with 34% of survey respondents noting they are planning to invest more capital in real estate debt, up from 14% in 2022. Furthermore, approximately 42% of institutions are planning to invest more capital in REITs to complement their private real estate portfolios, with 55% of REIT investors citing liquidity as a primary objective.
Institutions are continuing to emphasize the importance of ESG when making investment decisions, and investment managers continue to reposition their organizations and product offerings in response. This year, approximately 58% of institutions indicated that they have a formal policy in place, up from 56% in 2022 and 32% in 2016. However, the impacts of those policies on investment decisions vary by region. European institutions continue to lead the industry, with 89% responding that their investment decisions are influenced by ESG policies, compared to 28% of institutions in the U.S., where the political climate around ESG is more complicated.
175 institutions from 25 countries participated in this year’s survey, representing aggregate AUM exceeding US $10.2 trillion and portfolio investments in real estate totaling approximately US $1.1 trillion.
About Hodes Weill
Hodes Weill & Associates is a leading, global capital advisory firm focused on real estate, infrastructure, and other real assets. The firm has offices in New York, Denver, Hong Kong, London and Amsterdam. Founded in 2009, Hodes Weill provides institutional capital raising for funds, transactions, co-investments, and separate accounts; M&A, strategic, and restructuring advisory services; and fairness and valuation analyses. Clients include investment and fund managers, institutional investors, lenders, and public and private owners of assets and portfolio companies. For more information, please contact or visit www.hodesweill.com
*All U.S.-regulated capital market and securities advisory services are provided by Hodes Weill Securities, LLC, a registered broker-dealer with the SEC, and a member of FINRA and SIPC, and internationally, by non-U.S. Hodes Weill affiliates.
About Cornell University’s Program in Infrastructure Policy
The Cornell Program in Infrastructure Policy (CPIP) in the Cornell Jeb E. Brooks School of Public Policy is focused on improving the delivery, maintenance, and operation of physical infrastructure. This is accomplished through dedicated teaching, research, and outreach efforts in infrastructure policy. A key focus is on infrastructure funding and financing. CPIP coordinates scholars across multiple disciplines both inside and outside of Cornell University who share an interest in public policies impacting infrastructure. CPIP develops and disseminates research relevant to those policies. CPIP collaborates with partners in the public, private, and non-profit sectors to achieve those goals.
Disclaimer
For informational purposes only. This is not a solicitation to buy or sell any securities or securities products. Please refer to the full report for important disclaimers. The full report can be found at www.hodesweill.com/research
New Internship Opportunity at Merrill & Bank of America
It is with great sadness that ABANA announces the passing of Richard Abraham Debs at the age of 93 on January 28, 2024. As one of the most prominent and successful Arab Americans in industry, government and the nonprofit world, his impact and influence remain with every institution he touched. For ABANA, that influence was profound.
Debs was among ABANA’s first members in 1983 and was a constant advocate, supporter, and guide for our organization. Over the years, he attended nearly every Achievement Award Dinner, spoke at several ABANA events, and participated in dozens of others. In 2003, Debs was selected as the honoree for the ABANA Achievement Award. Thereafter, he received an honorary lifetime membership to ABANA yet continued to make yearly donations to our organization. Debs’ belief in community, integrity and impact played a crucial role in ABANA’s growth 40 years ago and remain core elements of our mission and purpose to this day.
In addition to his association with ABANA, Debs joined the legal department of the Federal Reserve Bank of New York in 1960; he later became Secretary of the Bank and ultimately Chief Operating Officer. In 1976, Debs joined Morgan Stanley International as its founding President, a role that demanded familiarity with diverse cultures and the ability to engage with global stakeholders. After retiring in 1987, he remained an Advisory Director at Morgan Stanley and dedicated himself to Board service for several other organizations. Debs was a passionate philanthropist and contributed to various educational and social causes through the Debs Foundation, which he founded with his wife Barbara.
ABANA expresses its sincere condolences and sympathies to the Debs family.
New Job Opportunity at 337 Frontier Capital
337 Frontier Capital, a NYC-based Frontier Africa equity investment firm is looking for a research analyst to join our team on a full-time basis. The role would involve deep-level, bottom-up research on companies listed on African stock exchanges, data analysis as well as macro-economic and political research. This would be an excellent opportunity to learn and be involved with all aspects of Frontier Africa equity research.
Candidate requirements:
Undergraduate degree in finance, accounting, and/or economics.
1-4 years of work experience in a relevant field.
Excel and database modeling proficiency.
Deep interest in frontier equity markets.
Ideally based in NYC, but remote working options would be considered.
A second language that is widely spoken in Africa (French, Arabic, Swahili).
Demonstrateable interest in equity investing, preferably with an African background.
Strong communication and presentation skills.
Team player who is willing to assist in a variety of roles as well as do some hard number crunching.
Progress towards, or completion, of the CFA designation is a plus.
How to apply: To be considered for this role please send us an equity research report you have written on a listed company, ideally in Africa, along with your resume.
