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Just 24 per cent commit to private real estate fund in first half

Less than a quarter of private real estate fund investors made a commitment in the first half of 2010, research by Preqin shows.

Quarter two 2010 saw 20 private equity real estate funds raise an aggregate USD7.3bn, the lowest quarterly fundraising total since Q3 2004.

Forty two per cent of investors plan to commit to a fund in the next 12 months, while 19 per cent would consider doing so.

Of the investors surveyed, 73 per cent are below their target allocation to real estate.

Forty three per cent of active investors are targeting core real estate funds, with 38 per cent interested in opportunistic strategies.

Only 28 per cent are interested in value added strategies, a significant decline from previous years.

Emerging markets are attracting increased interest, with 45 per cent of respondents stating an interest in Asia and rest of world funds.

Andrew Moylan, manager – real estate data, says: “The results of this survey make it clear that institutional investor confidence is far from returning to the private real estate market. 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 them to halt new investments as they need to do little to maintain current allocations.

“There are some signs of encouragement, however. Seventy three per cent of investors are below their target allocations and there is little evidence of target allocations being revised downwards, indicating that over the longer term investors will once again be looking to commit to funds.

“There have been some notable shifts in terms of strategy and regional focus. A significant number of investors are looking towards emerging markets investments, while in terms of strategy core and core plus funds are finding favour with risk-adverse investors.

“Opportunistic funds are still popular, but value added funds have certainly lost much of their attraction for institutions in the current market.”

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