MLG Capital has announced the results of its Registered Investment Advisor (“RIA”) private real estate survey.
During the first quarter of 2018, MLG Capital executives met one-on-one with RIAs throughout the United States, attended and hosted RIA events, and issued a written nationwide RIA survey to determine how the private real estate industry can better help RIAs meet their clients’ needs. Based on survey results as well as individual conversations over the years with 100+ RIAs, several clear trends emerged.
“Our research uncovered a major overarching theme. Investors ask their RIAs about private real estate constantly. RIAs believe their clients should be invested in private real estate and they believe it has a low correlation to the public market. However, few are investing in it at present, primarily because they don’t know where to find information and/or have not seen the data,” said MLG Capital CEO & Principal Timothy J. Wallen.
Key RIA survey findings include:
- 93 percent of RIAs believe clients should have alternative investments within their portfolio.
- 80 percent of RIAs expect alternative investments to produce between a 5-10 percent return.
- 73 percent of RIA’s clients invest in real estate with real estate representing 29 percent of all alternatives investments listed (private equity, private real estate, hedge funds, oil/gas, other).
- If an alternative investment product would benefit a client, but the asset manager is not on the RIA’s platform, 80 percent would introduce the asset management to the investment committee and work to get them approved on their platform.
- 93 percent of RIAs are asked about real estate by clients at least quarterly.
- Only 27 percent of RIAs proactively allocate discretionary client funds to private real estate.
- Of those who proactively allocate, only 33 percent of RIAs assess an asset management fee.
- 93 percent of RIAs believe private real estate has a low correlation to the public market.
- 60 percent of RIAs prefer an asset manager in business for 10+ years.
- 73 percent of RIAs said they would be more likely to consider private real estate if clients received a 1099, which avoids multi-state tax returns and UBTI, vs. a K1.
- When asked if they believe private real estate has historical outperformed the stock market, 13 percent said ‘no and I have the data’, 20 percent said ‘yes, private real estate must have a position in my clients’ portfolios’ and 53 percent said some form of ‘I don’t know, never looked into it or don’t know where to find the data.’
“Real estate has historically out performed stocks and bonds in inflationary, rising rate cycles. This looks especially likely today with P/E ratios around 24+ for the stock market. This is one reason we are proud to live and breathe real estate. Our goal, quite simply, is to provide the RIA community with the tools they need to make wise investment decisions for clients,” said Wallen.