Private wealth backs record – sized fund from Blackstone

Private clients provide up to 15% of $13.3bn for biggest ever property fund

Blackstone’s record-breaking global real estate opportunity fund, which closed on 10 October, includes the largest amount of capital from wealthy private investors ever raised in a single fund.

Blackstone Real Estate Partners VII attracted $13.3bn in 18 months from 250 investors, making it the biggest property fund ever raised. Some 35% of that capital has already been invested.

Sources said that in addition to the public and private pension funds and endowments that make up the majority of the capital committed, “10%-15%” of the equity came from wealthy private clients from three banks: JPMorgan, UBS and Bank of America Merrill Lynch.

JPMorgan clients alone invested “$850m-$1bn” they said, while clients from the other two banks invested another $500m-$800m in total, putting the total private wealth money invested at between $1.35bn and $1.8bn.

One of the sources said: “Nobody else has ever raised anything like that.” Another said: “The fund is enormous, so as a percentage, the private wealth money going in it is not out of kilter. But it is a mind-blowingly large amount.”

Jeremy Plummer, CEO of CBRE Global Multi Manager – which does not have clients in BREP VII – said: “What is happening in the opportunity space is interesting. There are so few global allocator opportunity fund managers, it’s narrowed to such a tiny list, that those left become winners.

“Quite a lot of the private banks would have one or two such products on their platform and five years ago, if you’d asked them what they are, they’d have said “our own”. But that has changed.”

Meanwhile, RREEF is the latest in a line of bank-owned real estate asset management businesses to pull out of opportunistic investing.

Although Deutsche Bank is keeping its real estate asset management business, after failing to sell it earlier this year, it is shutting down the opportunity strategy. Chris Papachristophorou, the chief executive responsible for the business, is leaving along with chief investment officer Kurt Roeloffs.

Other investors in BREP VII include: China State Adminis-tration of Foreign Exchange; the National Pension Service of Korea; the Ohio Police & Fire Pension Fund; Pennsylvania Public School Employees Retirement System; and the New Jersey Division of Investment.