Building Durable Real Estate Portfolios at Morgan Stanley – Lauren Hochfelder

**Lauren Hochfelder** (0:00)
We focus heavily on sizing our funds to the opportunity set. What you've seen over the last 10, 20 years is the rise of the mega cap fund.
Scale is no doubt a superpower.
It's hard to even express how valuable that is. However, when you've seen the rise of these individual closed-end funds that are 20 plus billion dollars to be deployed over a four-year period, you can be the world's most extraordinary investor. But if you have that much scale, you are going to be forced to deploy.
We position ourselves on both the real estate and infrastructure side for closed-end funds as squarely mid-market. It gives us competitive advantages in a few ways. We are able to be super selective. We have these broad themes. We size our funds that we can cherry pick and only make those investments that are particularly well-priced and the right asset within that. There's by nature less competition. So much of the growth in real estate and infrastructure over the last 20 years has been in these mega cap funds. That means it's pretty crowded. We're making individual investments that is too small for the mega caps and too big for the locals. We get better pricing.

**Ted Seides** (1:30)
I'm Ted Seides and this is Capital Allocators.
My guest on today's show is Lauren Hochfelder, head of Global Real Assets at Morgan Stanley, where she oversees a team of 300 investment professionals across 13 countries, managing $80 billion across real estate, infrastructure, equity, and credit. Lauren joined Morgan Stanley as an investment banking analyst directly out of Yale 26 years ago, and has spent her entire career at the firm, helping build one of the industry's leading platforms. Our conversation traces Lauren's journey from analyst to global head, and the evolution of Morgan Stanley's real estate business before, during, and after the global financial crisis. We cover the firm's thematic approach to investing behind structural demand tailwinds, combination of global perspectives and on-the-ground teams, operational improvements to assets, portfolio construction, and themes across industrial real estate and infrastructure, senior housing, and net lease properties. We also touch on riskier assets of real estate, and Lauren's new role, adding infrastructure to her real estate oversight. Before we get going, we're hiring at Capital Allocators. Two roles that will shape our next chapter. They're two of the best jobs in the business, at least in my opinion, that will help us bring together our community of allocators and managers to compound knowledge and relationships. Best of all, we get to serve this community without really selling them anything. Full descriptions of the role are available at capitalallocators.com. Thanks for spreading the word about our two new roles at Capital Allocators. Please enjoy my conversation with Lauren Hochfelder.
Lauren, thanks so much for joining me.

**Lauren Hochfelder** (3:23)
Thank you. It's so great to be together.

**Ted Seides** (3:25)
I'd love you to take me back to your path to this building.

**Lauren Hochfelder** (3:31)
It was a short path because I joined right out of college. I joined as an analyst straight out of Yale. No finance experience at all.
I'd been an investment banking summer analyst at Bear Stearns, but with that small exception, I joined straight out of college and have been here since.

**Ted Seides** (3:49)
Take me through what that path is to be working at the same firm for a couple of decades.

**Lauren Hochfelder** (3:55)
It's certainly one of the great surprises of my life that I am here still 26 years later.
It's been extraordinary. When I joined as an investment banking analyst, it was a two-year gig. At that point, I'm not sure I knew if I was going to go back to business school or back for a PhD in ancient Greek philosophy. It was pretty broad. What's been extraordinary is that I get to come here every day and still learn. You don't need to change firms to have multiple careers.
I feel like I've been surrounded by incredible colleagues, partners, and consistently been given opportunities to do more and more and more. Sometimes even before I realized I was ready. That keeps it exciting.

**Ted Seides** (4:42)
Walk me through the path of those major milestones over those 26 years.

**Lauren Hochfelder** (4:47)
I joined as an investment banking analyst. At that time, our real estate investing business was housed within investment banking. I had this fantastic opportunity to work on all things investment banking, M&A, equity raises, strategic transactions. Also, investing in real estate on behalf of our funds. I was quickly drawn to that. As an associate, I became dedicated to the investing side of our business.
I've, with one small exception, spent my whole career in a linear fashion. I was the associate underwriting and executing the deals, and then over time I came to be promoted to head of acquisitions, deputy CIO, and then ultimately global co-head of the real estate business.