Preqin’s Real Estate Online contains detailed information on 343 real estate investors that have a stated preference for first-time private real estate funds. Recent years have seen little change in institutional investor appetite for these funds, which are typically small in size and raised by newly-emerging managers. Since Q4 2012, 33% of investors on average have stated they will invest or are considering investing in first-time private real estate funds, while the peak in investor confidence took place in Q4 2011, when 41% of institutions stated that they would invest or consider investing first-time private real estate funds.
However, as the chart above shows, appetite for first-time private real estate funds differs significantly across investor types. The highest proportion of institutional investors that will invest or consider first-time funds are asset managers (42%), while comparatively, only 17% of private sector pension funds would invest or consider investing in first-time funds.
Additionally, North America is home to a higher proportion of investors that will invest or consider investing in first-time funds (36%), followed by Europe-based investors (27%) and Asia-based investors (23%). Twenty-six percent of investors based in regions outside the aforementioned continents will invest or are considering investing through first-time real estate funds.
Of the investors that invest in or consider first-time private real estate funds, the highest proportions have a preference for higher risk value added (81%) and opportunistic (81%) real estate funds, although over half will target core (65%), core-plus (52%) and real estate debt (52%) strategies. In terms of geography, 78% of LPs investing or considering investing in first-time funds look to invest in North-America-focused vehicles, closely followed by Europe-focused funds (75%).