Institutional investors have preferred investing via club deals and joint ventures over direct investments as a means to diversify risk and share expertise with like-minded investors to drive returns.

Much of the appetite for joint ventures was born after the financial crisis of 2007 when institutional investors began to re-evaluate their investment strategy after being burned by legacy blind pool commitments. As a result, joint ventures have often eclipsed investments into property funds as institutional investors prefer more discretion and control over the underlying assets amid disappointing returns in indirect vehicles, and more discretion over investment terms and fees.

Co-investment and joint venture vehicles have historically been utilised to acquire traditional assets such as income producing Class A office buildings in global gateway cities. However, increasingly joint venture vehicles have been set up to acquire alternative assets like student housing and logistics portfolios. Joint ventures often favour larger institutional investors with substantial pools of capital like sovereign wealth funds, insurance companies and pension funds who value the experience and expertise of fully aligned local partners, but they also offer a risk adjusted approach for smaller institutions to access larger pools of assets.

Joint venture structures have also become key in funding investments in development projects, bringing together developers, global institutional investors and Real Estate Private Equity funds. As real estate developers seek to address undersupply of stock amidst overwhelming demand, and investors continue to seek to share financial risk and drive returns through forward funding, joint ventures between stake holders are expected to increase as a means to plug an ever increasing funding gap.

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