Earlier this month, global real estate investment manager Hines launched the Hines Private Wealth Solutions platform. Since the firm has been offering real estate investment opportunities to private equity investors for the past 20 years, raising nearly $11 billion by the end of 2023, the move was more of a rebrand than a launch, according to Paul Ferraro, who added Hines. from the Carlyle Group two months ago to lead the effort.
The firm, whose offerings in the private wealth space include Non-tradable REITs and a real estate exchange, has relied primarily on independent broker/dealers to reach high net worth investors in the past. Ferraro's job will be to replicate what he did at Carlyle — develop Hines' relationships with RIAs and family offices, as well as call offices. launching new semi-liquid funds and expand business in Europe and Asia.
WealthManagement.com He recently spoke with Ferraro about his new role and what we should expect to see from Hines Private Wealth Solutions as it grows.
This Q&A has been edited for length, style and clarity.
WealthManagement.com: Hines has already worked in the private wealth channel for the past two decades. What was the impetus to create Private Wealth Solutions now?
Paul Ferraro: The Hines Private Wealth Solutions platform is based on the momentum of the 20-year history of the firm you talked about. We're calling it a rebrand, not a launch. In my opinion, it is part of a natural evolution of the business. It truly reflects a commitment to providing quality products to a variety of investors, both in the US and around the world.
Like our peers, we see great potential in the private wealth channel. What's different about Hines is that we believe our position as a real estate leader with a global footprint and 65+ years of experience makes us uniquely qualified to develop, manage and operate real estate assets in what is proving to be an ever-changing environment.
My role is to capitalize on the expected growth of private equity in expanding and deepening our relationships across distribution channels, expanding into Europe and Asia and offering investment opportunities across the risk/return spectrum designed to meet goals of our customers.
WM: Has Hines set any targets in terms of how much it would like to raise fundraising from the private wealth channel?
tut-tut: We do not publicly declare such intentions. What we're trying to do, though, is build a platform that's diversified across distribution channels both here in the U.S. and around the globe, so I think you can probably understand that the financial goals are aggressive, as they should be. to be.
WM: You ran private equity at the Carlyle Group before coming to Hines. What were some of the biggest takeaways from your role there on how to grow distribution channels for Hines?
tut-tut: At Carlyle, I was employee no. 1 for Carlyle Private Wealth. I was brought in from Morgan Stanley actually to build the business. And if you fast forward to the decade plus that I was there, we had distribution businesses covering wire and independent broker/dealers, an RIA and family office team, teams in Europe, Asia and Canada and we had raised about $50 billion commitments during that time. During that period we also created four semi-liquid evergreen offerings covering both credit and equity in the US, Europe and Asia.
There are only a handful of people in the industry who have built similar businesses. My plan is to use that playbook on how to do it successfully and execute it here at Hines.
WM: How does the firm currently get its products available to individual investors ahead of advisors?
tut-tut: The firm has historically focused heavily on a niche private wealth channel. And what I've been asked to do is grow that business significantly through new client forums, RIAs, and then multi- and single-family offices.
To put our products in front of these customers, no. 1, we need to build the infrastructure to do that, and that's happening now. This will allow us to launch new products that cater to the way RIAs and financial advisors consume them today. We're also looking to efficiently deliver our live deal content—not just funds—directly to RIAs and wealth management partners and family offices.
Those are the first two things—creating the necessary delivery systems, but also coming up with the right strategies and return profile and risk tolerance for those markets.
WM: You said the firm was very focused on a niche private wealth channel. What was that?
tut-tut: It would have been the independent broker/dealer channel.
WM: You just mentioned and the press release announcing Hines Private Wealth Solutions also mentioned deepening distribution channels. How are you planning to build those distribution systems?
PF: Again, it's a function of three things. It's the domestic infrastructure that we need that we're building and that's a work in progress. But it's also about partnering with certain platforms that RIAs and wealth managers like to use. We're doing that now, we're building those relationships, and that's going to allow us to deliver these products to RIAs and financial advisors in the way that they want to consume them.
WM: Are you talking about alternative investment platforms like CAIS, iCapital and Yieldstreet?
tut-tut: iCapital and CAIS are two that we have built relationships with and are growing, yes.
WM: Have the products Hines offered in the past, or is it offering now, available to retail investors? Or are they mainly focused on accredited investors?
tut-tut: At Hines, the products were designed specifically, in the past, for high net worth individuals and typically high net worth individuals who worked through several third-party wealth managers. This would focus on a non-traded REIT, for example, or a real estate exchange program. These are two great products we have on the market today.
But we're looking to expand that to potentially add things like real estate lending strategies and also direct deals, where we're bringing Hines' direct deal flow to investors through their wealth manager partners.
I would say the way the industry is going, the way financial advisors are investing in private market strategies today tends to be through semi-liquid open offerings. For us, any new products we roll out we'll want to structure them in a way that meets the needs of the majority of our financial advisors and RIAs.
WM: It sounds like Hines would like to offer more types of evergreen investment vehicles to the market. Do you have an idea of what types of products you can look at?
tut-tut: This is absolutely correct. I would say it's expanding our product line from what we have today, which is focused on income and capital appreciation to more real estate lending strategies that can also be focused on income and capital appreciation. capital, but do it in a different way than a capital strategy would.
WM: Focusing on real estate specifically as an investment choice, the last couple of years have been tough. The perception of what was happening in the commercial real estate market versus the reality may not have matched up for many people outside of that industry. Do you have any idea how advisors feel about allocating money to real estate right now?
tut-tut: Let me start by admitting that it has been a tough market for real estate for the past couple of years. And I think financial advisors are still reticent to jump in with both feet again.
What I would tell them is that our data shows that the real estate industry goes in long cycles. This is usually 15 to 17 years. The typical recession lasts an average of 26 months. Where are we today? The real estate correction started about two years ago when the Fed started raising interest rates. We're two years into that cycle and that means we're nearing the end of it in our opinion. When you look at the data, we believe we are seeing the signals of the start of a new long growth cycle. If this is a multi-year recovery, as we expect, I think investors could see increased distribution income; they could see more stability in valuations and in capital appreciation.
Our hope is that investors are seeing the same opportunity that we are, because these windows eventually close and the opportunity won't be there forever.
WM: Does Hines currently have any educational initiatives for advisors to bring them up to speed on what real estate investing can offer and how the various vehicles that Hines uses work?
tut-tut: The first place I would direct people to is our website. The Hines Private Wealth Solutions website has a lot of good information on and about real estate and private real estate investing.
We also do a lot of individual and client seminars for financial advisors, talking to their clients about real estate without talking about a specific product. It's really an educational opportunity for them. We will continue to build on it. And on top of that we have a talented veteran sales team that is out there in the market. These are people who have been with us for 15-20 years in many cases, so they are not new to this industry, they have been through multiple cycles. They can speak very intelligently about them.
WM: Is there anything else you think is important for our audience to know about Hines Private Wealth Solutions?
tut-tut: As we build the brand within the private wealth space, I would like them to know who we are, which is a real estate investment manager that develops, operates and owns assets. We have a strong diverse history dating back over 65 years. And private wealth is not new to us. We have a 20-year history in the private wealth industry. And depending on the return profile of the financial advisor or RIA and the risk tolerance they require, we should have a solution for them.