Fundraising Continues to Fall for Real Estate Private Equity
8/27/2010
| By Jason C Flynn
A report released today by alternative assets research firm Preqin indicates institutional investors remain hesitant to put capital back into private equity real estate funds.
According to Preqin’s report, 20 private equity real estate funds worldwide raised a total of $7.3 billion in the second quarter of 2010, the lowest quarterly mark since 2004. Andrew Moylan, manager of real estate data for Preqin, said the results illustrate the lack of confidence throughout the real estate industry.
“The results of this survey make it clear that investor confidence is far from returning to the private sector real estate market,” Moylan said. “For some investors, the fact that they have so many unfunded commitments and very limited levels of capital being returned to them in the form of distributions has caused many of them to halt new investments as they need to do little to maintain current allocations.”
Preqin found that only 24 percent of the 166 institutional investors surveyed made new allocations to private real estate funds in the first half of 2010. Only 42 percent plan to commit to private real estate funds in the next 12 months, according to the report.
Moylan did point to some regional differences in the way investors are preparing for the next year. He noted that 51 percent of North American investors surveyed expected to commit to a fund in the next 12 months, compared to 35 percent of European investors.
“Investors are in general very cautious at the moment, but it seems to be more a case of waiting until things improve, rather than expecting it to get worse,” Moylan said.
However, even as institutions have decreased their level of investment, several funds are still attracting interest, according to Moylan.
“Opportunistic funds are still fairly popular amongst institutions, and a lot of these are targeting distressed opportunities as part of their strategy,” Moylan said. “There has, however, been a distinct move toward core funds, with 43 percent of those investors which are planning to invest in the next year looking at core funds. The main reasons given were the low risk and stable returns.”
According to the report, emerging markets also are attracting attention. Nearly half of the respondents said they have an interest in funds focused on foreign markets such as Asia and South America.
|
|
