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Capital Outlay and Fund Types Targeted in 2015 by Private Real Estate Investors – December 2014

by Jack Jackson

  • 18 Dec 2014
  • RE

Data compiled from the Fund Searches and Mandates feature on Preqin’s Real Estate Online service shows that of all investors actively looking to invest in private real estate in 2015, 25% are public pension funds and 12% are private sector pension funds. Endowment plans and foundations make up 14% and 7% of investors respectively, while 10% of actively searching investors are insurance companies. 

The majority of active investors will be investing limited amounts of capital in private real estate funds in 2015, suggesting that investors remain cautious when allocating significant amounts of capital to the asset class. A notable 47% of investors planning to make capital commitments in 2015 are looking to deploy less than $50mn, with a further 23% planning to commit between $50mn and $99mn. The remaining 30% have earmarked over $100mn for investment in private real estate funds for 2015, with half of this group looking to invest between $300mn and $600mn, which is an encouraging sign for fundraising in the new year. 

Another positive sign for private real estate managers’ fundraising in 2015 is that the majority of active institutions will be looking to commit to two or more funds, with almost one-third expecting to make four or more commitments. Thirty-two percent of investors planning to make commitments in 2015 are looking to invest in just one fund, with a further 29% expecting to commit to two vehicles. 

As expected, institutions looking to make commitments in 2015 have a strong domestic bias, with investors much more likely to deploy capital in their home markets. The above chart shows that North America-based investors are the most likely to invest domestically, with 86% of investors in the region looking to target home markets. Seventy-two percent of active Europe-based investors and 66% of active Asia-Pacific-based investors are targeting their own regions in 2015. The chart also shows the disparity between North America- and Europe-based investor appetite for Asia-Pacific exposure and their desire for Western exposure. Investors in these regions are similarly attracted to global vehicles, with 26%, 28% and 31% of North America-, Europe- and Asia-Pacific-based investors respectively seeking worldwide exposure. 

In terms of strategies targeted, core, value added and opportunistic vehicles continue to be the most favoured among investors planning to be active in 2015, with 51%, 47% and 56% of investors looking to commit to these strategies respectively. Investor appetite for core-plus, debt and distressed vehicles has increased since December 2013, with core-plus funds being targeted by 32% of investors looking to make commitments next year, an increase of 11 percentage points on December 2013 data. Appetite for all strategies has increased since December 2013, suggesting investors are willing to consider a wide range of vehicles before making their final commitments.

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