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 wealth investors for the past 20 years, raising close to $11 billion by the end of 2023, the move was more of a rebranding than a launch, according to Paul Ferraro, who joined Hines from The Carlyle Group two months ago to lead the effort.
The firm, whose offerings in the private wealth space include non-traded REITs and a real estate exchange, has relied largely on independent broker/dealers to reach high-net-worth investors in the past. Ferraro’s task will be to duplicate what he did at Carlyle—develop Hines’ relationships with RIAs and family offices, as well as with wirehouses, launch new semi-liquid funds and expand the business in Europe and Asia.
WealthManagement.com recently talked to 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 right now?
Paul Ferraro: The Hines Private Wealth Solutions platform builds on the momentum of the firm’s 20-year history that you spoke of. We are calling it a rebranding rather than a launch. In my opinion, it is part of a natural evolution of the business. It really reflects on commitment to offering quality products to a variety of investors, both in the U.S. and around the world.
Like our peers, we see the enormous potential in the private wealth channel. What’s different about Hines is we believe our position as a real estate leader with global footprint and 65+ years experience makes us uniquely qualified to develop, manage and operate real estate assets in what is turning out to be an ever-changing environment.
My job is to capitalize on the expected growth of private wealth in broadening and deepening our relationships across distribution channels, expanding in Europe and Asia and providing investment opportunities across the risk/return spectrum designed to meet the goals of our clients.
WM: Has Hines set any goals in terms of how much it would like to grow fundraising from the private wealth channel?
PF: We don’t publicly state goals like that. What we are trying to do, though, is build a platform that’s diversified across distribution channels both here in the U.S. and across the globe, so I think you can probably read into that that the financial goals are aggressive, as they should be.
WM: You headed private wealth at the Carlyle Group before you came to Hines. What were some of the biggest takeaways from your role there about how to grow distribution channels for Hines?
PF: At Carlyle, I was employee No. 1 for Carlyle Private Wealth. I was brought in from Morgan Stanley to really to build the business. And if you fast-forward a decade plus that I was there, we had distribution businesses that were covering wirehouses and independent broker/dealers, an RIA and family office team, teams in Europe, Asia and Canada and we had amassed about $50 billion of commitments over that time. During that period we also created four evergreen semi-liquid offerings covering both credit and equity in the U.S., Europe and Asia.
There is only really a handful of people in the industry who 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 that are available for individual investors in front of advisors?
PF: The firm historically has really focused heavily on one particular private wealth channel. And what I’ve been asked to do is to expand that business significantly through new client forums, RIAs and then multi- and single-family offices.
To get our products in front of these clients, No. 1, we need to build the infrastructure necessary to do so, and that’s happening right now. That will allow us to launch new products that cater to the way RIAs and financial advisors consume them today. We are also looking to efficiently deliver our direct deal content—not just funds—directly to RIAs and wealth management partners and family offices.
That’s the first two things—to create the delivery systems necessary, but it’s also coming up with the right strategies and return profile and risk tolerance for those markets.
WM: You said the firm was heavily focused on one particular private wealth channel. What was it?
PF: 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 the distribution channels. How are you planning to build out those delivery systems?
PF: Again, it’s a function of three things. It’s the infrastructure internally that we need, which we are 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 are doing that now, we are building those relationships and that will allow us to deliver these products to RIAs and financial advisors the way that they want to consume them.
WM: Are you talking about alternative investment platforms like CAIS, iCapital and Yieldstreet?
PF: iCapital and CAIS are the two that we have built relationships with and are growing, yes.
WM: Have the products that Hines offered in the past, or is offering right now, been available to retail investors? Or have they been mostly focused on accredited investors?
PF: At Hines, the products have specifically, in the past, been designed for high-net-worth individuals and typically high-net-worth individuals that were working through some third-party wealth manager. That would be focused on a non-traded REIT, for example, or a real estate exchange program. Those are two big products we have today in the market.
But we are looking to expand that to potentially adding things like real estate credit strategies and also direct deals, where we are bringing direct Hines deal flow to investors through their wealth manager partners.
I would say the way the industry is moving, the way that financial advisors are investing in private market strategies today tends to be through open-ended semi-liquid offerings. For us, any new products we bring out we are going to want to structure them in a way that meets the needs of most 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 a sense of what types of products you might be looking at?
PF: That is absolutely accurate. I would say it’s expanding our product line-up from what we have today, which is focused on income and capital appreciation to the more real estate credit strategies that may also focus on income and capital appreciation, but do it in a different way than an equity strategy would.
WM: Focusing on real estate specifically as an investment choice, the past two years have been tough. The perception of what was going on in the commercial real estate market vs. reality may not have matched for many people who were outside of that industry. Do you have a sense of how advisors feel about allocating money to real estate right now?
PF: Let me start with acknowledging that it has been a tough market for real estate assets for the past two years. And I think financial advisors are still reticent to jump back in with both feet.
What I would say to them is our data shows that the real estate industry runs in long cycles. That’s typically 15 to 17 years. The typical downturn lasts 26 months, on average. Where are we today? The real estate correction began about two years ago, when the Fed started raising interest rates. We are two years into that cycle and that should mean we are towards the end of it in our view. When you look at the data, we believe we are seeing the signals of the beginning of a new long cycle of growth. If this is a multi-year recovery, like we expect, I think investors could see rising income from distributions; they could see more stability in valuations and capital appreciation.
Our hope is that investors are seeing the same opportunity we do because these windows do eventually close and the opportunity won’t be there forever.
WM: Does Hines currently have any education initiatives for advisors to get them up to speed on what real estate investment can offer and how the different vehicles that Hines employs work?
PF: The first place I would point people to is our website. The Hines Private Wealth Solutions website has a lot of good information on and about real estate and investing in private real estate.
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 are going to 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’ve been through multiple cycles. They can speak very intelligently about them.
WM: Is there anything else you feel it’s important for our audience to know about Hines Private Wealth Solutions?
PF: As we build the brand inside the private wealth space, I’d like them to know who we are, which is a real estate investment manager that develops, operates and owns assets. We have a strong diversified track record that dates back over 65 years. And private wealth is not new to us. We have a 20-year history within the private wealth industry. And depending on the financial advisor’s or RIA’s return profile and the risk tolerance they are seeking, we should have a solution for them.