2014 was the most successful year to date for private real estate debt fundraising, with 27 debt funds raising $20.4bn, up from the $15.7bn raised in 2013, and accounting for 22% of all capital raised by closed-end private real estate funds in 2014. This blog takes a look at the types of investors that have an appetite for these vehicles.
Preqin's Real Estate Online service currently tracks over 703 institutional investors with exposure to private real estate debt funds. Collectively, these investors allocate $845tn to the real estate asset class. The majority (80%) of these investors are based in North America, followed by those located in Europe and Asia, comprising 8% and 4% respectively. In terms of the geographic preferences of these institutions, there is a bias towards North America, with 91% of these investors allocating to this region. Sixty-five percent of investors target Europe, and 52% have an appetite for Asia. Global and emerging market exposure is also significant, at 47% and 43% respectively.
The chart above shows the composition of the 703 private real estate debt fund investors. Public and private pension funds represent the investor type with the strongest appetite for these vehicles, together accounting for over half (51%) of investors. Conversely, family offices are least likely to invest in debt as a real estate strategy; these investors make up only 4% of the investor pool, while sovereign wealth funds constitute just 2% of investors. The data suggests that the main contributors to the growth in debt-focused fundraising in 2014 were public and private pension funds.