PE Tech Report


Like this article?

Sign up to our free newsletter

Closed-end private real estate funds post positive changes in NAV for 18 consecutive quarters

In this extract from the Preqin Quarterly Update: Real Estate, Q1 2015, we analyse fund performance and take a look at private real estate funds currently in market.

Fund Performance

Closed-end private real estate funds have posted positive changes in NAV for 18 consecutive quarters, with Q3 2014 seeing an average 1.9 per cent increase in NAV (Fig 1). As of September 2014, funds of vintage years 2009-2012 are posting relatively strong returns, with the median IRR ranging from 12.8 per cent for vintage 2012 funds to 15.8 per cent for vintage 2009 funds. 

Examining J-curves of funds of recent vintage years also reveals the strong performance of these funds, while 2005 and 2006 offerings have not seen the same level of recovery. 

In terms of strategy, debt funds continue to outperform other strategies when looking at the PrEQIn Index (rebased to 100 as of 31 December 2007). As shown in Fig 5, the index reached 100.6 as of September 2014, compared to 77.6 and 72.0 for opportunistic and value added funds respectively.

Funds in Market

As of April 2015, there are 411 closed-end private real estate funds on the road, targeting combined commitments of USD153bn (Fig 3). The number of funds being marketed fell significantly during Q1 and stands at the lowest level since Q4 2010. Regionally, vehicles targeting North American real estate continue to make up the majority of funds on the road, but the number of funds targeting the region has declined from 289 in Q3 2014 to 240 in Q1 2015.

The competitive nature of the fundraising market is further highlighted by Fig 4, which shows that 53 per cent of funds in market have already been on the road for over a year. While 41 per cent of funds that are yet to hold a close have been launched in the past six months, 40 per cent of funds that have not held a close have been in market at least a year. 

Among the largest funds in market are global offerings from Brookfield Asset Management, Lone Star Funds and Oaktree Capital Management, as well as Carlyle Group’s seventh US-focused opportunistic offering.

Preqin releases quarterly reports covering private equity, hedge funds, infrastructure, real estate and private debt. All five quarterly updates can be accessed for free in our Research Center.

Like this article? Sign up to our free newsletter