Private Equity Real Assets Funds: What They Are and What They Invest In

Technology parks, cloud infrastructure platforms, hospitals, universities, airports...

Investing in real assets is also part of the strategies you can access through Private Equity funds.

In this entry, we explain what this investment involves and the advantages of diversifying your portfolio with a Private Equity Real Assets fund.

Investment in real assets mainly involves investing in Real Estate and infrastructure. It is one of the most resilient strategies within private markets, focusing on investing in large real estate properties and essential infrastructure of various characteristics.

Private Equity funds allow you to invest globally, accessing infrastructure or buildings of great magnitude anywhere in the world. These funds pool money from investors to purchase properties and generate returns through appreciation, income from usage, or value-creation strategies.

There are other ways to invest in real estate, but PE funds are the only option that, with a single investment, give you exposure to hundreds of assets worldwide and allow you to access powerful markets such as the United States.

• PE Real Estate funds invest in large-scale lands and buildings, such as major housing developments, hotels, or university residences. For example, Blackstone acquired Hilton Hotels in 2007 for about $26 billion. After restructuring and improving its operations, Hilton went public in 2013, generating significant profits for the fund, estimated at about three times the initial investment.
•  Infrastructure funds invest in large-scale constructions and cutting-edge infrastructure such as technology parks, 5G infrastructure, as well as essential societal assets like airports, highways, or bridges.

For example, according to an NBER study that analyzed over 2,400 airports worldwide, airports managed by private companies outperformed their public and other privately-managed counterparts. Metrics such as passengers per flight and route availability increased significantly under PE fund management, with passenger traffic increasing by 84% compared to 20% under other types of management. This success demonstrates the ability of private equity funds to drive profitability and improve services in large-scale infrastructure investments.

1. Global Exposure: Due to current regulations, accessing this type of assets outside Spanish territory (without directly purchasing a property) is impossible. Only international Private Equity funds can provide access to opportunities in other countries.

What is better? Investing in a housing development in a Spanish city or in over 300 opportunities in different countries.

2. Diversification and Lower Risk: When you invest through a fund with a single investment, you gain exposure to a large number of assets in different parts of the world with varied characteristics, thus reducing the risk of your investment. Additionally, these funds typically have a very low loss ratio, around 5%.

3. Regulated Product: Compared to other options, investment funds are regulated products supervised by the CNMV, the entity responsible for ensuring investor safety and protection.

However, like any investment, it carries risks, and you must understand the product and assess whether it suits your profile before investing in Private Equity funds. Additionally, these products are more illiquid, as they require a longer time horizon than other strategies. These funds typically have a lifespan of about 10-12 years.

This content is for informational purposes only. It is financial education content provided by Crescenta, with no intention of issuing any type of personalized investment recommendation.

It is not, in any case, an advertisement for any financial instrument, nor a recommendation or offer to buy.

Author

Sofía Cisneros

Communication and content - Crescenta