Diego-Lopez_Real-Estate-Capital-20260221 R02

Diego Lopez: (0:00 - 0:26)

When you are out there competing with large firms like consulting firms or other providers of data, it's hard to build your name as a provider or as a consultant, and that takes time. But again, building on what I've learned from sports and keeping the side on the long-term target, if you stay consistent, if you stay working hard, I think it's going to pay off at some point.

Nancy Lashine: (0:26 - 2:43)

Hello and thanks for tuning in to Real Estate Capital. I'm your host, Nancy Lashine of Park Madison Partners. Capital is the lifeblood of the real estate industry, but the decisions on where and how it's allocated are driven by people and personalities.

Who are they? What motivates them? What can we learn from their experiences?

On this show, we introduce you to some of the real estate industry's most influential thought leaders and decision makers, and we talk about what is important to them, how they make critical decisions, who has influenced them, and a lot more. Our guest on today's episode is Diego Lopez, Founder and Managing Director of Global Sovereign Wealth Funds. Diego is one of the world's foremost experts on sovereign funds.

His firm gathers little-seen data on these very large investors and advises and trains people at these institutions across the globe. Before this, Diego spent five years at PwC, leading an initiative to grow their footprint in the sovereign wealth fund community, and prior to that he worked for KPMG and Santander. Diego is also a world-renowned extreme open water and ice swimmer who has competed in races on all seven continents, including in the 28-degree waters of Antarctica without a wetsuit.

He is the author of the book Continents Seven: Values for sports, business and life, learned around the world. His swimming accomplishments and awards are too numerous to mention here, so I will leave with just one. He's the only person to swim one of the most challenging events in each continent, Continent 7, in a year.

And he is fast. He has held the U.S. Winter Swimming National Champion title in the 100 and 200 freestyles. In our conversation, Diego pulls back the curtain on how sovereign wealth funds really think, how they've evolved from passive capital to some of the most sophisticated investors in the world, and the role that real estate plays in their portfolios and where they're searching for the most interesting opportunities.

We also touch on the surprising parallels between building a platform and swimming in icy waters on every continent. 

Diego, so great to have you. Thank you so much and welcome to Real Estate Capital. Good to see you.

Diego Lopez: (2:44 - 2:46)

Thank you for having me. It's great to see you.

Nancy Lashine: (2:47 - 3:16)

Yeah, well, Diego, you are truly a man of the world. I think you have lived, if I have it right, on four continents and nine countries, and you're currently in Singapore. And you're the founder and managing director of the Global Sovereign Wealth Fund organization, which is a boutique financial firm.

You're a data firm. You're an advisory firm and a training firm. Did I get that right?

Diego Lopez: (3:17 - 3:17)

You did, yeah.

Nancy Lashine: (3:18 - 3:30)

Okay. And it's a firm that you founded in 2018. Right.

So circle back a little bit. Tell us about your early career. How'd you get into the sovereign wealth fund game?

Diego Lopez: (3:31 - 3:49)

Yeah, absolutely. I mean, I'm Spanish by origin, as my accent can tell, but I did part of my uni and my master's degree in London School of Economics. But then I went back to Spain to start my career in banking, actually.

I started my career in derivatives trading of all things.

Nancy Lashine: (3:50 - 3:51)

Of course.

Diego Lopez: (3:52 - 3:58)

Of course, that's what you do. So that was back in Santander, so the largest Spanish bank.

Nancy Lashine: (3:58 - 3:58)

Sure.

Diego Lopez: (3:58 - 5:04)

And then shortly after, I moved to corporate finance, because that was something that really intrigued me, how companies got finance and how they could go do an IPO or do capital markets, et cetera. This was already the global financial crisis. My intent was to move to the US, but because of the GFC, I was moved to the other direction, to emerging markets.

So I moved to Qatar, and that was my first experience outside of Europe. And in Qatar, well, all the economy flows back to the sovereign wealth fund. So I started to get acquainted with what this concept of sovereign wealth fund was, and I started advising the sovereign wealth fund of Qatar very often.

And since then, that's all what I've thought about in my life, was sovereign wealth funds. So it's a really fascinating world of public finance and how states manage their wealth. So it's great that now our company gets to do that on a daily basis.

Nancy Lashine: (5:06 - 5:10)

Give us a sense of the size. How big are sovereign wealth funds? How many are there?

Diego Lopez: (5:11 - 6:27)

Yeah, so it really depends on how you define them, so there is not a single definition of a sovereign wealth fund. The IMF tried to do that in 2007-8, but that definition, if you look at it today, that's heavily obsolete because they have evolved so much. And before, it was the case that a sovereign wealth fund would be savings mechanism for the country to invest overseas only.

Today, we see a lot of hybrid situations where the state may have some stakes domestically, but then they would also invest overseas. So it really depends on the definition, but we try to keep it as broad as possible to be more useful and comprehensive for our clients. And therefore, we count as many as 200 sovereign wealth funds that manage about 15.4 trillion US dollars today. So very impressive figure. Obviously, part of this wealth is, a lot of this wealth is in the Middle East and in Asia, but the US has great sovereign wealth funds too. I just had an interview with the New Mexico State Investment Council, which is projecting to become the largest US sovereign wealth fund in three years time.

Nancy Lashine: (6:27 - 6:36)

Yeah, they have huge inflows. So just for clarity then, in the US, what percentage of those 200 funds are here in the US, roughly?

Diego Lopez: (6:37 - 7:10)

So in the US, we count 26 different sovereign wealth funds at the state level, and they manage about 400 billion, give or take. So that's still quite low compared to the global tie. But obviously in the US, we have the retirement system, so we count them as public pension funds.

So if you take together sovereigns and pensions and central banks, the US is still leading when it comes to public finance. It's just that in the niche of sovereign wealth funds, it's still very emerging, I would say.

Nancy Lashine: (7:10 - 7:17)

Are most or all of the sovereign wealth funds in the world based on either oil or natural resources?

Diego Lopez: (7:19 - 8:14)

Yeah, so that's a good question. And again, if you go back to the origins of sovereign wealth funds, most of them were oil-sourced. Today, it's roughly half.

So half of the wealth comes from commodities, normally oil, but you also have like the Chilean sovereign wealth fund comes from copper, the Botswana sovereign wealth fund comes from diamonds. So it could be other sort of commodities. And then the other half comes from foreign reserves, right?

Like here in Singapore, GAC was set up in 1981, the year I was born. And it was not out of oil. I mean, it was the first sovereign wealth fund that didn't come from oil.

And basically it was because they set it up as a trading hub, right? Free zone. They had so much capital in the central bank that they wanted to set up a savings mechanism that would target higher yields.

So it didn't come from oil at all. Today, we're seeing many more non-oil funds, if that makes sense.

Nancy Lashine: (8:15 - 8:35)

Right. I didn't know before that you were born in 1981, but I did think that 2018 was really a huge year for you because you both published your book. You are a published author, and I would love to talk about that.

And you started this company, this business. Maybe there really is some magic in that one in the eight. Who knows?

Diego Lopez: (8:35 - 8:50)

I did. And I was living in a small apartment in midtown Manhattan,  just publishing the book from there. And then at the same time, sort of creating the company out of thin air.

It was really exciting. It was a very big year.

Nancy Lashine: (8:50 - 9:05)

So you're known, let's talk about the book for a few minutes because it's fun. You're known as a global swimmer or the global swimmer. And the book is called Continent Seven Values for Sports, Business and Life Learned Around the World.

Tell us about the book.

Diego Lopez: (9:06 - 10:15)

Yeah, absolutely. I mean, the Continent Seven is a funny story because in Spain, we grew up studying the five continents. So we believe that there are five continents in the world.

But then I moved to the US and they told me, well, actually, we count seven because we split the Americas into North and South. And then we count Antarctica. And I was like, wow, okay.

So I was talking to a friend of mine that runs the Open Water Swimming Association. And he said, well, nobody has really done the seven continents in a single year. And then I was like, what do you mean seven?

He's like, yeah, nobody has swum in the seven continents, including Antarctica. I said, wow, that would be really cool. So I set my sights into doing that in 2018.

So I swam one of the major swims in each of the seven continents. And the last one was in Antarctica. So we went to Antarctica in November of 2018, during Thanksgiving, I would swim only with trunks in waters of, I think it was like 29 degrees Fahrenheit because it's salted water, so it doesn't freeze.

Nancy Lashine: (10:15 - 10:18)

29 degrees Fahrenheit, no wetsuit.

Diego Lopez: (10:18 - 10:19)

Yeah. Yeah, no wetsuit.

Nancy Lashine: (10:20 - 10:22)

How long were you in the water, would you say?

Diego Lopez: (10:23 - 10:56)

So we call it the ice kilometer. So you have to swim for a thousand meters. So that took me about 13 minutes.

So during that time, my temperature dropped by 15 degrees. And it's a very dangerous sport, but luckily we were surrounded by very trained physicians and sportsmen, mostly from South Africa, because that's what they do there. So we were very lucky to be supported and to conclude that huge endeavor, which was the Continent Seven, as I called it.

Nancy Lashine: (10:56 - 11:00)

Did you do it? Were there others who did it with you?

Diego Lopez: (11:01 - 11:11)

Yes. So the last swim, it was done with 15 others. So we were 15. It was sort of a race. I was there, but I was happy to just finish it.

Nancy Lashine: (11:12 - 11:26)

For sure. Well, my cousin, who I think you've probably swam with in South Africa, tips his hat to you for doing that one, because that is crazy. How did you get into cold water swimming?

Diego Lopez: (11:27 - 12:12)

Well, I was living in New York, right? And I was sort of getting into this open water swimming in general. So I did the English Channel from England to France.

I did the Catalina Channel in California. And sort of as you go harder and harder and aspiring to do more challenges, the ice swimming surface as a possibility. They do in the US, they do this swimming in Vermont, which is like, it's funny, they carve out the ice in the lake, and then you swim there as soon as the water doesn't freeze again.

It was very, I guess, challenging and appealing for me to get into it.

Nancy Lashine: (12:13 - 12:20)

You would think that living in New York City would not be the most conducive place to train for open water swimming. You must have done a lot of laps.

Diego Lopez: (12:21 - 12:34)

Yeah, exactly. I mean, it's actually a good place to train for ice swimming because you go to Brighton Beach or Coney Island and you get there in wintertime and that's a perfect playground for ice swimming.

Nancy Lashine: (12:36 - 12:40)

Okay, I'm going to catch my breath as we carry on with this conversation. By the way, are you still swimming?

Diego Lopez: (12:42 - 12:53)

I am, but here in Singapore, the waters are like 83 Fahrenheit. So it's not cold at all. It's actually on the other side, but yeah, I am still swimming.

Nancy Lashine: (12:54 - 13:03)

How often during your working day or over time do you think about the lessons that you learned from distance swimming?

Diego Lopez: (13:04 - 14:00)

I mean, I always have them in my mind. I mean the good thing about sports is that it teaches you discipline, consistency, hard work, and I've always applied that to my work.

And a lot of clients have told me over the years that they really value the consistency that we bring and that is something that is becoming quite uncommon. Like, I'll give you an example. If we say we're going to publish a report every first day of the year or the first day of the month, well, we've done that for the past six years. Whether it has rained or snowed or whether I was sick or whether it was a New Year's Eve or I was on holidays. I mean, that's something that we've always strived to do. And that's something that in my experience, clients really value. The values that I've learned from sports, I apply them every single day in my work life.

Nancy Lashine: (14:00 - 14:14)

Yeah, that makes sense. And it's fun to think about that as we start to all turn on our TV and watch the Winter Olympics. Think about all the training that's gone into that.

What sort of challenges have you had in building this business?

Diego Lopez: (14:16 - 15:38)

When you design the business, it's sort of easy to think that you are a subject matter expert, that you are good at what you do. I think the first challenge I had in my business was how to monetize all that knowledge, all those contacts, how to build a proper business out of your expertise. But then what we've done is that every two years, we set up a new vertical within the business, basically leveraging our relationship with our existing clients.

Because once they trust you, if you start developing new products within, obviously, a consistent suite of services, they will really go for it. So I think that's one of the first challenges. And then, I guess, building trust as a small player, when you are out there competing with large firms like consulting firms or other providers of data, it's hard to build your name as a provider or as a consultant.

And that takes time. But again, building on what I've learned from sports and keeping the side on the long-term target, if you stay consistent, if you stay working hard, I think it's going to pay off at some point. So yeah, you take a lot of no's as answers, but you keep knocking doors and at some point, they're going to open.

Nancy Lashine: (15:38 - 15:45)

Are your clients mostly the sovereign wealth funds, the pension funds, the investment management firms, or some of the governments?

Diego Lopez: (15:47 - 17:33)

So we have a large array of clients, more than 100 clients. On the data side, a third of them are actually sovereign wealth funds, which came as a little bit of a surprise to us.

Because when we design the data platform, the reason that we started the data side of things was that when I was at PricewaterhouseCoopers, we would always look for information about sovereign wealth funds. And there was not a single provider that would give us good, actionable, and insightful data on sovereign wealth funds because they're so big and nobody really understood them. So that was the idea behind setting up GlobalSWF on the data platform.

So when we set it up, I had these consultant clients in mind, I had asset managers in mind. I never thought that the sovereign wealth funds themselves were going to be interested. But the reality is that because they're so focused on their mandate, a sovereign wealth fund of Abu Dhabi wouldn't necessarily know what a sovereign wealth fund in Singapore or a sovereign wealth fund in New Mexico are doing.

So they would actually find it very useful to know about their peers. So a third of our clients today are sovereigns on the data side. Another third are large asset managers, big names that you can think of.

They are all obviously very interested in knowing what the sovereigns are doing. And then the third third are service providers, including the large financial institutions, mostly from the US, large law firms, and then large consulting firms. So some of my former employers, etc.

So it's a very diverse array of clients that are interested in or dealing with the sovereign wealth funds.

Nancy Lashine: (17:33 - 18:00)

Right. Fascinating. It's true.

I'd never heard of anyone collecting the data that you've collected on sovereign wealth funds before we met. It's true. So before we dive into real estate, since this is a real estate capital podcast, can you talk to us a little bit about the investment strategies that you're seeing amongst the sovereign wealth funds and how they have been evolving and how, say, the Middle East might be different to Asia, to Australia, etc.

Diego Lopez: (18:02 - 18:42)

Yeah, it's interesting because we've seen the evolution of sovereign wealth funds as investment vehicles. If you think about sovereigns in the beginning, and again, the first sovereign, pure sovereign wealth fund was set up 50 or 60 years ago, so not that long ago, right? So if you think about how they operated at the beginning, they were very passive.

They were fund investors, they were investing in plain vanilla products, and they were considered dumb money. And that's not my word. That was actually in Goldman Sachs indictment that they did with the Libyans.

So they were referring to the sovereigns as dumb money.

Nancy Lashine: (18:43 - 18:44)

During the GFC.

Diego Lopez: (18:45 - 19:37)

Yeah, exactly. So if you think about sovereigns today, there's nothing dumb about them. I mean, they're so sophisticated.

They have really evolved. I mean, if you think about their strategies before, it was sort of buy and hold because they are so long term that they didn't think about selling.

Today, that has changed dramatically. We were hearing from the CEO of Mubadala last week in Davos, and he was saying that they're recycling 10% of their AUM every year. So every year, they would sell 10% of the balance sheet, and they would buy for the same amount in other sort of technologies and industries and things that they deem more important for the future.

So that's really sophisticated and that tells you a lot of how far away they've come during these years.

Nancy Lashine: (19:38 - 19:48)

So what is the role of real estate in the sovereign wealth portfolios? What is it, and how does it differ from one to the next?

Diego Lopez: (19:49 - 20:59)

Because sovereign wealth funds are all on a different journey. Most of them start by investing in stocks and bonds, right?

So that's the most sort of plain vanilla. But then as they look to diversify away from the 60-40 model, I think real estate is an obvious choice for them because they understand brick and mortar. This is something that they grew up used to.

So real estate has always been a centerpiece in their asset allocation. And if we look at how the asset class has evolved, I think we saw a peak in the real estate allocation of about 8% of their portfolios in 2020, right before COVID. Obviously, COVID changed real estate and how they perceived it.

And now they've sort of transitioned to different segments within the asset class. And the total allocation has dropped a little bit on relative terms. But because the AUM keeps growing, the overall stock is still at a historical peak.

So we calculate about $3 trillion invested by sovereigns and pensions in at least the real estate.

Nancy Lashine:  (21:00 - 21:22)

Right. It might be worth throwing up. I think you have a great slide that shows that.

It's a bar chart. And it also, in addition to showing real estate going from, say, a peak of 7.8% down to where it is today at 7.2%, it also shows some of the other asset types, like private equity and infrastructure, and what their relative percentages is.

Diego Lopez: (21:23 - 21:55)

Exactly. So what we've seen is that over time, stocks and bonds have become less and less in the total portfolio. So for those watching, the blue bars have sort of decreased over time to the benefit of alternative asset classes, including real estate, infrastructure, and private equity.

And the relative allocation to real estate has sort of dropped to 7.2% last year. But because the AUM keeps growing, it's about $3 trillion invested in real estate globally.

Nancy Lashine: (21:56 - 22:07)

And how fast, where do you think that $3 trillion, assuming we stayed in that 7.2% range, how fast, based on the growth of these sovereign funds, what will that get to in a few years?

Diego Lopez: (22:08 - 23:06)

Yeah, I mean, that's a challenging question to answer, because every year we try to forecast the AUM of the industry by 2030. And the reality is that in the past three years, the industry has really outperformed every other in this. And I guess it's a factor of two things.

One is existing funds growing more, because they are investing well, and they're reaping their rewards. But also we're seeing a lot of newcomers into the industry, like in Abu Dhabi, there's a new sovereign wealth fund, it's managing new wealth for the emirate. Here in Southeast Asia, we saw Danantara in Indonesia becoming a very significant player as well.

So we have new sovereign wealth funds coming to market, and we have those existing sovereign wealth funds growing. So to your question, if we keep the 7.2% of allocation to real estate, we may see that $3 trillion becoming $4 trillion and $5 trillion in a few years' time.

Nancy Lashine: (23:07 - 23:14)

Where within real estate are the sovereign wealth funds investing? What property types are interesting to them?

Diego Lopez: (23:15 - 24:40)

That's a great question. And as we said, I mean, if you look at how the segments have changed, and how COVID has changed the preferences of sovereign investors, I mean, if you think about the first part of the chart, which is 2016, 17, 18, they were very used to investing what we refer to as trophy assets, right? So big hotels, big landmark properties in major cities.

Today, and thanks to COVID, that has shifted into a model of looking for what the future is going to need. So data centers, obviously, is a big centerpiece, because AI is going to need a lot of computing power. And therefore data centers, we've seen it increasing from, let me see here in the chart, from virtually nothing in 2016, to about 14% of the portfolio in 2025 in all the real estate investments by sovereigns and pensions.

The other big ones are senior housing within the residential segment, as well as affordable housing, right? So we're seeing a huge shift into the sort of properties that sovereigns and pensions are interested in, but because they're analyzing what the future is going to need. And that aligns very well with the long-term sort of horizon.

Nancy Lashine: (24:41 - 24:49)

And this is all equity, is there debt in here as well or is this just focused on equity?

Diego Lopez: (24:50 - 25:25)

There is debt as well. We are seeing a surge in private debt and credit across asset classes, not only real estate but also on infrastructure and all sort of industries. In real estate, some of these investors are setting up dedicated teams that understand real estate debt and are becoming more sophisticated.

But I would say, especially for sovereigns, it's still early days. I mean, pension funds are normally more sophisticated when it comes to asset classes. For sovereigns, it's still early days when it comes to real estate debt, but they'll get there for sure.

Nancy Lashine: (25:26 - 25:30)

Who are the biggest real estate investors now amongst the sovereigns?

Diego Lopez: (25:31 - 26:45)

We have a little table here that shows our estimates. As you may imagine, some of these institutions do not report their total balance sheet or their total allocation into specific asset classes.

But we estimate it based on... I mean, for us, every sovereign is like a puzzle that we have to solve. So, we got different pieces from here and there. You're reading between the lines, you read the fine print of the annual reports. And therefore, we do estimated guesses on their AUM and asset allocation. And based on those estimates, we believe that GAC here in Singapore is the largest allocator to real estate globally, with about 13% of their almost $1 trillion balance sheet.

So, that means about $122 billion allocated to real estate as of the latest estimate. It's followed by Adia in the Gulf, so Abu Dhabi Investment Authority. As it's also a very large real estate allocator. They have also over $1 trillion in assets under management. We believe they allocate now to at least the real estate, about 8%. So, that means almost $90 billion today.

Nancy Lashine: (26:46 - 26:46)

Right.

Diego Lopez: (26:47 - 26:56)

So, yeah, mostly, as you can see, out of the top 10, I think 7 or 8 are Asian or Middle Eastern sovereigns.

Nancy Lashine: (26:57 - 27:11)

Right. So, the outliers, when you see QuadReal on there, British BCI, at 33% real estate, is that because it was really set up to be a real estate vehicle or why is it so high?

Diego Lopez: (27:12 - 27:55)

Exactly. Yeah. I mean, in the case of the Canadians, it's interesting because three or four out of the Maple 8 have dedicated managers when it comes to real estate.

So, QuadReal for BCI, Cadillac Fairview for Ontario Teachers, Oxford Properties for OMERS, and it used to be Ivanhoe and Altera for CDPQ or La Caisse. Today, those businesses have been integrated. But it's interesting how they only for real estate, they decided to have dedicated managers. And those managers have been also raising capital from third party in some cases. So, there is some degree of third party capital in those numbers as well.

Nancy Lashine: (27:55 - 28:01)

Ah, that makes sense. What is DH with 67% real estate?

Diego Lopez: (28:02 - 28:21)

Yeah, that's Dubai Holding. So, Dubai Holding owns most of Dubai real estate. 

So, it's been diversifying now. So, they've been investing more into infrastructure and asset classes. But they started as a real estate business holding from the Dubai properties.

Nancy Lashine: (28:22 - 28:25)

And what countries are these sovereigns investing in?

Diego Lopez: (28:26 - 29:21)

So, in 2025, we saw a huge focus on the US, right? So, US was very dominant when it comes to investments overall across asset classes.

If we look at real estate in particular, as you can see the chart, the US represented about half of all the deployment into real estate. It was striking, I would say, how dominant the US was in 2025. I think on one side is the amount of investable opportunities.

But the other side also is geopolitics, right? So, a lot of the Canadians, Europeans, sovereign world funds sort of scaled back from China and from Asia in general. And the alternative was to allocate more into the US.

So, we've seen that effect playing into real estate as well.

Nancy Lashine: (29:21 - 29:33)

The noise around changing, though, the tax code for foreign investors, I'm surprised that number was that high because for a good portion of the year, we didn't know what the tax implications might be.

Diego Lopez: (29:34 - 30:00)

Yeah, that's a great point. We believe it's still noise. We don't see the merits of implementing that change.

And if you think about the current administration, it's very pro-business. So, we don't see it would align very well with their policies. So, I think sovereigns are aware of this and they're still bullish on the tax regime staying the same.

Nancy Lashine: (30:01 - 30:15)

So, I think you have one more chart that focuses on real estate in the biggest city in the US, in New York. And it's kind of surprising when you look at this. Tell us what you see when you look at this.

Diego Lopez: (30:16 - 31:51)

Yeah, I mean, it's unbelievable, right? I mean, for those of us that live or have lived in Manhattan, I mean, to see all these pinpoints of properties that sovereigns and pensions own in the city. There is only one other city where the presence of sovereigns is so prominent, which is London.

So, sovereign investors love London and sovereign investors love New York. And many times they buy properties through SPV. So, we don't really see them in the papers.

But the reality is that they may own the building where your offices or where your house is. So, they own from the Chrysler Building, it used to be owned by Abu Dhabi Investment Council. The Empire State Reit, 10% of it is owned by the Qataris.

The Rockefeller is owned by the CIC in China. The one Vanderbilt is owned by the Koreans. So, I can carry on and on.

In 2025, we also saw a surge in real estate investments in Manhattan by sovereigns. I think PIA from Saudi Arabia did their first acquisition in a Manhattan real estate. Norway continued to buy very prominently.

So, if we look at the whole stock of New York properties owned by sovereigns and pensions, the largest one is La Caisse or formerly known as CDPQ out of Canada. And the second one is Qatar Investment Authority. Overall, it's about $55 billion in properties across Manhattan.

Nancy Lashine: (31:51 - 31:59)

Wow. And it seems like a good number of them are office buildings, which is not the most favorite property type.

Diego Lopez: (32:00 - 32:32)

Yeah, exactly. A lot of it has been recycled. So, some of them have sold or sort of restructured.

Like if you think about Manhattan West and Hudson Yards, that whole project was financed by Oxford Properties of OMERS and also QA. And some of those buildings have already been sold now. So, again, they've become to a point where they are really sophisticated investors and they know when to sell.

And therefore, we're seeing a lot of turnover in real estate Manhattan as well.

Nancy Lashine: (32:34 - 32:50)

And I think I've asked you this once, but I'm going to ask it slightly differently. Do you see any change in sentiment, given some of the things going on with the current administration, either to accelerate that investment or perhaps reduce the investment?

Diego Lopez: (32:51 - 33:54)

The reality is that sovereigns and pension, we meet them all the time. Again, I was in the Middle East last week and we meet them and we ask them.

And the reality is that there are not so many alternatives to the U.S. So in Europe, the growth is sluggish. In Asia, you have this whole geopolitics playing and a lot of country risk in each of the propositions. So the U.S. remains as a very safe haven for them, for their investments. Regardless of geopolitical considerations and political considerations, I think they are still very bullish in the U.S. because it's, well, it's the largest market in the world. So, I mean, the MSCI Global Index is, what, 65 percent weighted to the U.S.? So if you look at their portfolio, some of them are very much aligned to that weighting. Some others are lower, trying to diversify more, but they still consider that as a normal behavior for a rational investor.

Nancy Lashine: (33:55 - 34:05)

Are you able to track the performance of these sovereign wealth funds, either in their real estate, direct real estate, or across their whole portfolio?

Diego Lopez: (34:06 - 35:05)

Yeah, we do. And it was actually surprised that we did a recent analysis on the performance per asset class in the past 10 years for those funds that are more transparent and report that sort of asset class performance. And the worst asset class in terms performance was real estate in relative terms, right?

I mean, fixed income still performed worse in absolute terms. But if you compare it to the benchmarks that sovereign pensions were using, real estate was by far the worst performing asset class. Now, it can be for two reasons.

One obviously is COVID. But even if we isolate COVID, the previous five years were not great either. And the other reason could be that the benchmark they are using is not really appropriate, right?

So the absolute performance is not that bad, but I think they've lost on average.

Nancy Lashine: (35:05 - 35:07)

What was the absolute performance?

Diego Lopez: (35:08 - 35:39)

The absolute performance was about 9%, if I'm not wrong. But then the relative performance was 117 basis points negative. So they've lost 117 points against the benchmarks that they were using.

So, each of them uses a different benchmark. We've been looking at some of the benchmarks that they use, but some of them may not be appropriate for, again, given that last 10 years have been quite volatile in terms of real estate.

Nancy Lashine: (35:40 - 36:12)

Well, certainly owning the kind of office properties that we had up on the screen a moment ago, like the Chrysler building or Rock Center or any of those landmark older buildings, they have lost value. So, depending upon when they bought them, it may in fact be not a great investment. I guess most sovereign wealth funds don't use much of any leverage.

So, they wouldn't be looking at losing a property and losing all their equity, but just losing a portion of it.

Diego Lopez: (36:13 - 36:47)

Yeah, I think leverage is something that they are starting to look at. I mean, if we look at pension funds, if you look at CalPERS, CalPERS has been learning from the Canadian pension funds in how to use leverage. And I think now they can have up to 20% of leverage, which in reality, they are only using, I think, 6%.

For sovereigns, traditionally, they haven't used leverage, but they are starting to issue bonds, they are starting to raise third-party capital, and they're starting to look into how to use leverage in the balance sheet as well.

Nancy Lashine: (36:48 - 36:56)

Have you heard sovereigns talking about the data center business and are they still very bullish? Are they concerned that there's a bubble? What are you hearing?

Diego Lopez: (36:57 - 38:01)

I think they're concerned about a potential bubble on the pure AI business, like startups, like, well, startups, just to call it like that, but data bricks or, XAI or, space AI, like they are raising huge amounts of capital. Some of them are in series L now, which we haven't seen before. When it comes to data centers, I think they are less concerned.

I think, again, because they understand the brick and mortar concept and that data center, they believe is still going to be needed. So I think we're still seeing a lot of activity in data centers around the world. And the beauty about data centers, I think, is like it's a very global business so they can invest in the U.S., but there are also big data centers in other parts of the world. I think some of the Middle Eastern funds just invested in a huge data center in the border between Singapore and Malaysia a few months ago. So it's a very global business and, , it doesn't have to stick to major cities.

Nancy Lashine: (38:02 - 38:07)

Do most of the sovereigns invest directly or do they invest through funds when they invest in real estate?

Diego Lopez: (38:08 - 38:58)

That's an interesting one because last year we, well, in the past few years, we have started seeing that because sovereigns and pensions are becoming so frequently co-investors that they know each other very well. And sometimes they don't need a GP anymore. So it used to be the case where KKR or Blackstone or BlackRock, they will put together the consortia and they will call the sovereigns and pensions.

Today, they call themselves. They know each other very well. And sometimes they buy targets without the need of GP.

So I think we tried the co-investments last year. It was about 60 billion US dollars. And I think about 5% or 10% of the capital was actually deployed without a GP in the transaction.

Nancy Lashine: (38:59 - 38:59)

Wow.

Diego Lopez: (39:00 - 39:03)

So we expect more of that in the years to come.

Nancy Lashine: (39:04 - 39:15)

Yeah. Yeah. Very interesting. That's fascinating. Diego, what's next for your business? Where are you going to be three years from now?

Diego Lopez: (39:16 - 40:22)

We are still growing very rapidly, gaining market share from all the providers, newcomers, like asset managers and any sort of player interested in the business. So our growth on the data is very consistent and very strong.

But we're trying to, again, complement it with other verticals that we believe may benefit sovereigns and pensions. So we've been thinking about how to tackle the human capital side of things. So as it's a very competitive market for human capital.

And sometimes sovereigns really rely on people to make their investments. That's their wealth. 

Obviously, we have what we call the Sovereign Wealth Fund Academy, which is about training their existing professionals. But we're also trying to think how to help them recruit best-in-class professionals for the future. So we expect to be focusing a little bit on that in the next year or so.

Nancy Lashine: (40:22 - 40:29)

Oh, fantastic. That's great. Well, you've lived in so many places. Do you have a favorite?

Diego Lopez: (40:31 - 41:17)

I mean, in my younger days, I really loved working and living in Hong Kong. That was a really special place.

It was sort of a work hard, play hard kind of place. And this is actually where I started doing open water swimming. So I think Hong Kong will always have a place in my heart.

The Netherlands is great because of the growth. When you live there, you see the amount of new buildings surrounding you. So seeing that growth from the floor is really unparalleled.

And then, , my family is still in New York City, and we always come back. So New York will always be there as well.

Nancy Lashine: (41:18 - 41:19)

Do you have a favorite restaurant?

Diego Lopez: (41:21 - 41:22)

Where? In New York, you mean?

Nancy Lashine: (41:23 - 41:24)

Yeah, yeah.

Diego Lopez: (41:26 - 41:30)

It's a classic, but I love going to Benjamin's Steaks house on 42nd.

Nancy Lashine: (41:31- 41:36)

It's around the corner from us.

Diego Lopez: (41:37 - 41:45)

It's a classic, but I really love going there and bringing my clients and having a steak with cream spinach.

Nancy Lashine: (41:46 - 41:54)

You'll have to let me know next time you're in New York. We'll go do that. Who's had the greatest influence on you personally, Diego?

Diego Lopez: (41:56 - 42:49)

I had a great boss when I was in Abu Dhabi. He was a very seasoned professional that they brought from Australia to build out the Sovereign Wealth Fund business.

As an Australian national, he was a bit of a character, a very tough personality. And not many people could keep up with him. But I could. And for three years, I learned a huge deal from him on the Sovereign Wealth Fund space, on the culture in the Middle East. So I was really happy to be his right hand for three years. And then after that period, when he retired, I sort of took all the learnings with me.

But yeah, he was a great influence in my career.

Nancy Lashine: (42:50 - 43:06)

Fantastic. You're very lucky. Diego, thank you so very much.

Really, really appreciate your time. It's fascinating what you've built and the ecosystem that you live in. And it will continue to grow and be an important part of all of our lives.

So we appreciate your sharing that with us today.

Diego Lopez: (43:07 - 43:09)

Absolutely. Thank you so much, Nancy.

Nancy Lashine: (43:10 - 43:16)

It's great to see you. And go out and buy the book. Take care. Bye.

Diego Lopez: (43:17 - 43:18)

Absolutely. Thank you.

Nancy Lashine: (43:21 - 43:42)

I hope you enjoyed this episode of Real Estate Capital. Before you go, I have a quick favor to ask. We put a lot of thought and effort into this show and making sure we bring you insights from real estate leaders that you don't normally find in the mainstream media.

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