Bain Capital, a private equity firm based in Boston, is entering the real-estate investment business by lifting out a 20-person team from Harvard Management Co..
The new group, Bain Capital Real Estate, will be led by Dan Cummings, who is joining the firm as a partner at the beginning of February. Cummings and his team have invested $3.4 billion in real estate for Harvard University’s endowment.
Harvard’s Chief Investment Officer Nirmal (Narv) Narvekar, who joined the endowment in December 2016, has been dismantling its in-house investment teams after years of disappointing performance. The spinout of the real estate group is part of that restructuring as Harvard, like most endowments, has shifted to hiring external asset managers.
“We started speaking about six months ago,” Jonathan Lavine, co-managing partner of Bain Capital, said in a phone interview. “Dan talked about his strategic and thematic approach to real estate like we describe all of our businesses here.”
Harvard’s real estate group, co-founded by Cummings in 2010, makes direct investments in niche areas of the global property market. His team focuses on themes such as urbanization, aging in America, and life sciences. For example, Harvard Management Co. has invested in self-storage, fitting within the trend of more people moving to cities, as well as senior housing and independent living facilities.
Lavine said that the real estate team will add insight to some of Bain’s other investments, including distressed real estate credit. Bain oversees $85 billion in private equity, credit, public equity and venture capital assets.
“We’ve been working on this idea for a year with Harvard as it has adopted a new business model,” Cummings said about spinning out from the university endowment. “We’ve been a consistent top performer at HMC and everybody wanted to take extra care with the process of going independent.”
The team’s direct investing strategy returned 20.2 percent in fiscal 2016 and 35.5 percent in fiscal 2015, according to Harvard Management Co.’s annual reports. Bain is still in the process of determining the group’s future strategy. Although no decisions have yet been made, the new unit is likely to explore raising outside capital.
“I have to believe we’ll find substantial new opportunities,” said Cummings.