Invesco Cuts Fees 20% as Real Estate Fund Faces Queue
(Bloomberg) — Invesco Ltd. is cutting management fees by 20% for investors in a $12.7 billion real estate fund, as the firm grapples with a backlog of redemption requests.
Clients of the Invesco Core Real Estate—USA fund, known as ICRE, can also cash out at a discount in an upcoming tender offer, the firm said in a recent investor letter reviewed by Bloomberg. Both measures are part of a push to ease what the company called an“elevated redemption queue.”
Invesco’s private real estate fund targets income-producing propertyfor institutional backers such as public pensions, and was designed to give them periodic exit opportunities. But it hasn’t allowed investors to take out all the money they’ve requested amid an uneven recovery for US real estate, according to people familiar with the matter.
The open-ended fund has a redemption queue of $2.2 billion, investor documents show. With investors seeking to pull cash, average yearly redemption payments have represented 5.3% of the fund’s net asset value since 2022, up from an average of 3.5% historically each year, according to one of the people, all of whom asked not to be identified discussing non-public information.
The fund’s challenges reflect the persistent strain in the real estate industry as money managers reckon with old office portfolios hamstrung by debt and elevated interest rates.
While the artificial intelligence-fueled data center build-out has lifted returns for some property investors, many firms still struggle to squeeze profits out of assets acquired at sky-high valuations. Real estate values remain roughly 25% below their prior peak, according to a report from JPMorgan Chase & Co. And investors remain jittery.
To ease the redemption backlog for ICRE, Invesco is facilitating the tender offer. IDR Investment Management, an affiliate of an existing shareholder, will buy other investors’ shares at 95% of net asset value.
Invesco and its senior leaders will also add up to $150 million to the fund “to reinforce alignment,” the document says.
Invesco executives aren’t the only ones that have had to put in their own money in order to boost investor confidence. Earlier this year, Blackstone executives joined their employer to add $400 million to a private credit fund to help cover redemption requests.
In another sweetener, investors with no active redemption requests willsee fees cut by 20% through the end of 2027. Clients who add at least $10 million will pay zero fees on new commitments for a year.
“This is a decisive step we’ve taken to strengthen and reposition ICRE as the market enters the early stages of a new cycle, with improving fundamentals, easing credit conditions, and historically attractive entry points,” Invesco said in a statement.
Invesco hired a new portfolio management team last year and is repositioning the investment mix. The fund’s total returns were up 3.53% this yearthrough June 30, exceeding its benchmark index by 78 basis points.
