Joe Harvey: Just in terms of the return cycle, I am going to let Jon elaborate on that just to start.
Jon Cheigh: Hey, John. Well, as we mentioned earlier, so again, last year, U.S. REITs were down 25%. Private, I think, was up 7% or 8%. So there’s been a 30%-plus gap from a performance standpoint. Of course, no one exactly knows how much of that gap from a performance standpoint we expect to close out. But we could see in relative terms, probably, 10% to 20% outperformance over the next 12 months to 18 months between, again, how the private market has been valued and how the public market has been valued. So it’s pretty significant. Of course, for different kinds of investors their ability to take advantage of that from a tactical standpoint for some of the large sovereigns and other institutional investors they are an inflow mode.
They have capital put to work. So I think for institutions like that, they are able to rebalance where they are investing incremental capital and we are certainly seeing that. A lot of these conversations with institutions that have been going on for 12 months, 24 months and this is similar to what we saw in 2020. You have those conversations, people feel like they miss something and then they get the opportunity. Sometimes they are a little bit nervous because things are going down. But then as things start to stabilize, they get in a position to take advantage of opportunities. So we think we are transitioning from this. Everything is volatile. Everything are correct. If people don’t want to buy a falling knife to people are in a better position to take advantage of where they see relative value.
So I think for institutions like that, they can certainly take advantage of it. And look, I talked about what’s happening on the non-traded REIT side. I think that the redemptions are a symptom of investors recognizing that most things in their portfolio, including listed REITs, went down 10%, 20%, 30% last year and something didn’t and that creates a really good rebalancing opportunity. So I think the redemption activity is an outcome of the relative value that’s been created and so I definitely think we are going to see some shifts at the margin in the wealth side, which we are already seeing.
John Dunn: Right. Yeah. Yeah. And on that last point, beyond the right now, how would you kind of categorize the close-end fund window and do you have a target for the number of launches per year?
Joe Harvey: We don’t have a target for the launches for year. We have ideas that we think are great ideas for the close-end fund market. As you know, right now, it is closed. It’s been closed for well over a year and the market volatility and interest rate cycle had the most effect on that. But one of the things that that has been happening as we get further along in the interest rate cycle is that the discounts on some of our closed-end funds have been narrowing. Just by example, our listed infrastructure fund has been trading pretty close to NAV and I expect that once we get to the end of the tightened cycle and closer to the easing cycle, these — some of these discounts will go close fully and perhaps go into premiums and then the conditions will set up for the new issue market to open up. So right now, it’s not factored into our planning other than we have investment ideas that we think are good, but it’s going to take a while before the new issue market opens up.
John Dunn: Got you. And then maybe turning to the institutional side, like 10 years ago, your guys’ pipeline was on average about $500 million and then it kind of leveled up to $1.5 billion often plus that. Do you think over the next maybe few years, is there ability to level up again at some point to get consistently above maybe $2 billion and is that even an aspiration?
Joe Harvey: That’s not something that we can predict. I’d say, in my comments that it’s averaged $1.1 billion for the last three years, which includes a favorable environment for investing in our asset classes. So I would expect this adoption of real assets to continue and as the environment gets better that we should revert back to that level. And when you think about what we have invested in our distribution capabilities, and the fact that we have expanded those markets, I would expect something to a multiple to be added on to that. So I don’t know what that number ends up being, but I would be disappointed if we didn’t get into the $1.5 billion to plus $1 billion range as we get back in the normal environment.
John Dunn: Makes sense. Okay. I get this question recently. What’s kind of like the profile of your REIT competitors? Are people exiting the space? Are they shrinking? Are the larger players getting larger? What’s going on with reinvesting competition?
Jon Cheigh: Well, the first thing is, as Joe mentioned, how much our market share in active peers grown. The first thing is, I am not going to say all of our competitors have shrunk significantly. But over the last two years, there has been some comparatives that have gone away and there are some that have shrunk in considerably. And over the last 10 years or so, there have certainly been other competitors or players in the space that have been in favor. And then I would say, to be honest, because they had good performance and then there have been — and then sometimes they have gone out of favor. I think we have been consistently in the mix because we have been consistently top quartile, even though who has been in that top quartile has lacked some wins over time.
So we continue to take market share because we are putting up consistent performance, we have a consistent team and our platform is very healthy. So we are able to continue to invest in our people, invest in the resources that we need and the resources we needed 20 years ago, they were very different today. And that’s — I think our clients and prospective clients see that we are investing on the macro side, on the risk side, on the data side, on the quantitative side, and all those things have allowed us to evolve and keep getting better.
