Private real estate debt funds have seen a surge in growth in recent years, with fund managers stepping in to fi ll the void left by traditional lenders retreating from the market. Fundraising for these vehicles peaked in 2011, with capital raised by solely debt-focused funds accounting for 16% of all capital raised by private real estate funds.
Although fundraising for this strategy has declined since then, fund managers are still confident of their ability to raise capital for debt funds, with the amount currently targeted by debt funds in market representing an increase of 155% compared to capital targeted by debt funds in February 2012.
Despite investor appetite for this strategy increasing considerably in recent years, there have been slight decreases in 2013, with investors often favouring funds making equity investments. However, with debt funds of recent vintage years demonstrating strong performance, investor appetite may increase further in the future.
Regionally, the US has accounted for the vast majority of capital raised by debt funds historically. However, increasing regulation and scrutiny of banks means many now believe it is an excellent time to invest in European real estate debt and fund managers are keen to take advantage of this opportunity. The capital targeted by Europe-focused debt funds in market currently stands at $12.4bn, compared to only $2.6bn targeted by funds in market in August 2011.
Source : Preqin