Real Assets Round Up Survey 2022
Thank you to everyone who responded to the Sousou Partners survey – Real Assets Round Up. We are delighted to share with you the results which offer a global outlook reflecting on 2022 and looking ahead to 2023.
After a turbulent 2022 and with challenges ahead for 2023, only 16% of respondents felt optimistic about the year ahead. This figure is comparatively lower than how respondents felt about the start of 2022 with 45% optimistic. Indicated confidence levels on average fell across all groups in the period between January 2022 and November 2022. However, all groups also saw an increase in confidence heading into 2023. The indicated confidence levels of the Hospitality and Infrastructure sectors have been comparatively more optimistic than the Real Estate sector and the cross-sector average for all respondents.
Sheds, beds, and meds were the real estate asset classes that respondents felt most optimistic about, with 26%, 31% and 11% of respondents feeling most positive about those sectors respectively. Hospitality was also popular among respondents with 11% feeling optimistic for the sector.
There was a marked difference in terms of appetite for different geographies depending on respondents’ locations. Those in Europe were looking mostly at major European cities and regions, but also at parts of North America and APAC. Conversely, North American respondents were more locally minded, with a limited number excited about European opportunities.
70% of all respondents hired in 2022. Across sectors, this number is broadly similar, however dips to only 63% of respondents in Infrastructure firms. When looking at how much capital respondents’ firms had committed last year, we see a general trend, that the more they deployed, the more likely they were to have been active in hiring.
The type of hires differed across sector with Real Estate and Hospitality firms undertaking more growth hires, whilst Infrastructure firms instead focused more on replacement hires. North America was in more of a growth-mode than Europe, with 51% of North American firms making growth hires last year, vs 43% of European firms.
Nearly 50% of respondents found it difficult to hire new staff in 2022, with only 9% of respondents finding hiring easy. The Hospitality sector had the least difficulty, with 17% finding hiring easy. Comparatively, those in the infrastructure space had the toughest time, with only 7% finding hiring easy. Staff attraction and retention tools were varied, including better compensation, flexible working, better training, improving culture, creating new revenue streams and greater transparency.
Most Popular Attraction and Retention Tools
Most respondents felt that total compensation for next year will be up or flat, with those in North America more expectant of a pay-rise in the new year. Perhaps surprisingly, nearly a quarter of respondents in the infrastructure sector are expecting total compensation to fall next year. Across different sectors, those in Hospitality are most bullish on compensation.
56% of all respondents have an LTIP/Carry scheme in place. Figures are nearly identical across sector, geography, and investment strategy. However, there is variation across type of company, with the majority of Private Equity Groups (89%) having one in place or set to introduce one. This falls to 75% of Investment Managers.
Carry or LTIP typically schemes kick in at Vice President or Director level. Those firms with higher risk/return strategies are more likely to offer these schemes to more junior members of the team, with 8% of groups that primarily target Opportunistic returns providing Carry or LTIP participation for Analysts. Conversely, 50% of managers that primarily target Core returns don’t offer participation until at least Director level.
Through our global lens, Sousou Partners’ view of the market is that whilst hiring has slowed due to the decrease in transaction and fundraising activity, 2023 will present buying opportunities once interest rates stabilise and valuations correct. Many firms will be looking to best position themselves for when activity restarts through strategic hires in the new year. Bucking the general trend, hiring within asset management, debt and capital raising remains strong. Compensation has been a hot topic in the lead-up to year-end, with individuals looking more towards cash-based retention plans given many carry and LTIP schemes are underwater. General market sentiment is that compensation will be largely flat or slightly up across functions and sectors, especially in those areas that have seen unprecedented rises over the last few years.
Thank you to all who took part and we wish you a great holiday season.