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Asset manager Fifth Wall has shed staff and stopped active fundraising, seven sources told Axios Pro.

Why it matters: It's a dramatic shift for the $3 billion AUM firm that has been among the most visible investors backing climate and real estate technologies.

High interest rates and the Trump administration's climate policies factored in these decisions.

Fifth Wall CEO Brendan Wallace confirmed the firm has paused active fundraising and made headcount reductions.

Zoom in: The firm's climate team was especially hard hit, five sources said.

The sources in this story were granted anonymity to protect them from professional repercussions.

Fifth Wall's Wallace, in two interviews with Axios Pro last week, contended that the firm has made modest headcount reductions, which he said largely affected the firm's climate specialists and investment banking practice.

A firm spokesperson, in an email, said the firm last year had 41 employees, down from 58 in 2022.

Wallace meanwhile disputed that the firm had had a dedicated group of climate-focused investors. "There's no climate-tech team," he said. "We have climate tech deals across all of our funds."

Behind the scenes: An archive of the Fifth Wall website from November 2022 refers to "70+ employees," including 10 from that year whose bios deeper in the site refer in various ways to the firm's Climate Technology investment team.

Six sources told Axios Pro the firm at its peak had more than 80 people.

The site, as of Tuesday, lists 11 people from the firm's leadership, investing and advisory teams.

Between the lines: The staff reductions occurred as the firm canceled repeated fundraising campaigns, four sources said.

Those sources said this included a $500 million to $1 billion proptech fund, but Wallace denied having launched such a fund.

The LA-based firm meanwhile abandoned a consulting service effort, ceased raising an infrastructure fund and aborted its expansion into investment banking, three sources said.

"I've tried to launch other strategies," Wallace said, acknowledging the canceled campaigns and the winding down of several initiatives. "I've not been able to replicate the success we've had in our proptech funds."

What they're saying: Wallace acknowledged that Fifth Wall has paused active fundraising, though its REACT fund, an acronym referring to the firm's now-consolidated real estate and climate tech strategies, remains open to further investment.

"We're not actively marketing it," Wallace said.

Fifth Wall stopped raising the new climate and infrastructure funds "once Trump got elected," he said. "We made the call — because fundraising efforts became much, much harder — to cancel that."

The latest: The firm is sitting on $600 million of dry powder, Wallace said, plus $124 million it raised last year for the REACT Fund.

The firm had sought $500 million for the fund, per a December SEC filing.

Context: Those numbers are well below Fifth Wall's 2021-2022 activity, which included closing an $866 million proptech fund, almost $500 million for its debut climate fund, and $159 million for a Europe-focused fund.

Fifth Wall at the time seemed poised to capitalize on two trends: near-zero interest rates that left real estate investors seeking returns from other asset classes, and government pressures on large landlords to decarbonize their buildings.

Real estate firms came to make up 65% of Fifth Wall's limited partners, Wallace said.

Friction point: Fifth Wall's reliance on real estate LPs left it exposed to rising interest rates, which reduced venture allocations broadly, three sources said.

The intrigue: Some of Fifth Wall's LPs also grew sour with Wallace's aggressive investment strategy, four sources said.

Wallace in early 2022 told fund managers to invest virtually all their capital, regularly citing capital deployment targets during team calls, two of those sources said.

Those targets forced bets on a wide array of risky technologies as valuations crested during the height of the venture- and climate-tech boom, the two sources said.

The rapid investment pace diminished Fifth Wall's ability to make follow-on investments, the two sources said.

The other side: Wallace disputed the accounts. "We don't have deployment targets," he told Axios Pro.

These and other decisions fueled perceptions from some LPs that Fifth Wall had lost focus and strategic discipline, four sources said.

As investments underperformed, and interest rates began to rise, LPs chafed at Fifth Wall initiatives that had seemingly little connection to its core proptech thesis — such as investments in retail clothing companies like Untuckit, and the firm's consulting practice, they said.

Wallace said the Untuckit investment was part of a broader retail strategy launched at the request of one of Fifth Wall's largest investors to back digital-native brands.

A Fifth Wall spokesperson, in an email, said that the firm's "first two vintage of funds," spanning 2016-2021, "are 1st or 2nd quartile."

The firm did not disclose the performance of its $866 million third fund, which it announced closing in December 2022.

"Managers who performed well and maintained their process, we reupped," an LP source said. "Those that didn't, we just dropped it."

The LP's firm declined to back Fifth Wall's latest funds. "It was taking on too many of these projects, too many of these avenues," the source said.

"I can only discuss what's in front of me, and the results so far suggest perhaps mistakes were made," another source said.

What we're watching: Wallace said the firm is growing. He maintains it will resume active fundraising next year. "We'll do that sometime in '27," he said.

"The real estate market has continued to struggle, and so what I don't think we'll raise is $1 billion. I think we'll raise a much smaller fund."

Katie Fehrenbacher contributed reporting.

Disclosure: Cox Enterprises is the owner of Axios Media, which has editorial independence. Another Cox Enterprises subsidiary, Cox Communications, has made investments as a limited partner in certain Fifth Wall funds.

Scoop: Fifth Wall cuts staff, pauses fundraising

It's a dramatic shift for the $3 billion AUM firm.

Illustration of a storm destroying a roof made from a one hundred dollar bill 

Asset manager Fifth Wall has shed staff and stopped active fundraising, seven sources told Axios Pro.Why it matters: It&#x27;s a dramatic shift for the $3 billion AUM firm that has been among the <a class="gtmContentClick" data-vars-link-text="most" data-vars-click-url="https://www.axios.com/pro/climate-deals/2023/02/01/our-next-energy-fifth-wall-franklin-templeton-one" data-vars-content-id="75122f7b-6608-4e5e-8767-7ac16fcb7f9a" data-vars-headline="Scoop: Fifth Wall cuts staff, pauses fundraising" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/pro/climate-deals/2023/02/01/our-next-energy-fifth-wall-franklin-templeton-one" target="_self">most</a> <a class="gtmContentClick" data-vars-link-text="visible" data-vars-click-url="https://www.axios.com/pro/fintech-deals/2024/03/21/fifth-wall-wallace-climate-fintech-next-step-debt-fund" data-vars-content-id="75122f7b-6608-4e5e-8767-7ac16fcb7f9a" data-vars-headline="Scoop: Fifth Wall cuts staff, pauses fundraising" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/pro/fintech-deals/2024/03/21/fifth-wall-wallace-climate-fintech-next-step-debt-fund" target="_self">visible</a> <a class="gtmContentClick" data-vars-link-text="investors" data-vars-click-url="https://www.axios.com/pro/climate-deals/2024/06/03/brendan-wallace-fifth-wall-climate-buildings-vc" data-vars-content-id="75122f7b-6608-4e5e-8767-7ac16fcb7f9a" data-vars-headline="Scoop: Fifth Wall cuts staff, pauses fundraising" data-vars-event-category="story" data-vars-sub-category="story" data-vars-item="in_content_link" href="https://www.axios.com/pro/climate-deals/2024/06/03/brendan-wallace-fifth-wall-climate-buildings-vc" target="_self">investors</a> backing climate and real estate technologies.<ul><li>High interest rates and the Trump administration&#x27;s climate policies factored in these decisions.</li><li>Fifth Wall CEO Brendan Wallace confirmed the firm has paused active fundraising and made headcount reductions.</li></ul>

Scoop: Fifth Wall cuts staff, pauses fundraising

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