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First-Time Private Real Estate Fund Managers – April 2013

by Karun Ahluwalia

  • 19 Apr 2013
  • RE

Preqin has identified a continued decline in appetite within the investor community towards first-time fund managers following the onset of the financial crisis. The decline highlights the challenging conditions for first-time fund managers with investor confidence over this period being on a continued downward spiral. In 2007, there were 97 first-time funds that had closed with a total of $16.6bn. A look at the same data two years later exemplifies the plummeting of investor confidence in first-time fund managers, with 53 funds raising an aggregate $7.3bn in 2009.

In 2010, there was an increase in the number of first-time funds holding a final close and in the amount of aggregate capital raised relative to the previous year, with 66 funds closing on a total of $8.1bn. Although, in 2011 there was a decline in the number of funds closed (55 funds), there was an increase in the amount of capital raised ($9.7bn). The return of investor interest in the market in general in these two years is highlighted by the proportional increase in capital raised by first-time funds as a percentage of all closed-end funds, which grew from 14% in 2009 to 18% in 2010. In 2012, there was a significant decline in both the number of funds closed to that of 33, and the amount of total capital raised, to $6bn.

Further evidence of receding investor interest can be observed by the decline in capital raised by first-time funds as a percentage of all closed-end fundraising. In 2011, first-time funds accounted for 17% of total capital raised by all private real estate funds, with this figure dropping to 11% in 2012. Over this period, investors have remained cautious when considering fund commitments and have evidently viewed experience as a key factor when considering fund managers to invest with. Thus it seems fundraising will remain a continued struggle for many first-time fund managers.

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