Raising capital for private real estate funds remains a very challenging prospect and the fi rst quarter of 2013 was a slow period for fundraising, with just $5.2bn raised by the 20 funds to close in the quarter. Competition for investor commitments is intense and fund managers need to be prepared for a long fundraising process. Funds are increasingly spending more than a year on the road, and a signifi cant proportion of funds in market have been fundraising for over 18 months. However, recent years have seen a number of funds reaching or exceeding their fundraising targets, suggesting increasing momentum in the fundraising market. Fundraising for new managers will likely be particularly challenging as the proportion of investors prepared to commit to fi rst-time funds has steadily declined in recent years.
There are signs many investors are now moving up the risk/return curve, with appetite for value added and opportunistic strategies increasing. This is particularly notable among North America-based institutions, with 68% of those expecting to be active in the coming 12 months targeting value added funds.
The recent performance of the private equity real estate asset class is encouraging, with NAVs increasing in each of the past 10 quarters. The IRRs generated by those vintage years most affected by the economic downturn continue to improve, while the initial signs are that many funds of the most vintages will be strong performers.
Source : Preqin