Private Equity Real Estate Assets Under Management – April 2014

by Claire McNeil

  • 17 Apr 2014
  • PE
  • RE

Assets under management (AUM) are defined by Preqin as dry powder (uncalled investor capital) plus the unrealized value of the investments within a fund’s portfolio. The assets under management of closed-end private real estate funds have grown substantially over the last decade, from $101bn in December 2003 (40% of which was dry powder) to $658bn in June 2013 (23% of which was dry powder). In June 2013 US-focused AUM stood at $372bn (57% of global real estate AUM), Europe at $143bn (22%) and Asia at $105bn (16%).

Broken down by regional focus, the AUM of US-, Europe- and Asia-focused real estate funds have each increased since the 2007-2008 onset of the financial crisis, showing AUM figures of $235bn, $89bn and $83bn respectively, at year-end 2007. Since September 2010, US-focused AUM has increased in every quarter to June 2013. Asia- and Europe-focused AUM have also had a positive change overall since September 2010, despite fluctuations in the interim period. All three regions have surpassed their pre-crisis peaks, each reaching their highest AUM levels as of June 2013.

These increases are largely attributable to rising unrealized value figures for closed-ended real estate funds in all three regions, with dry powder becoming less significant in AUM figures. Unrealized portfolio values have risen every year since December 2009, peaking at $506bn in June 2013, more than double the year-end 2007 levels of $246bn; dry powder over this period has seen relatively little change, decreasing from $166bn in December 2008 to $151bn in June 2013. The unrealized values of funds focusing across all three regions have more than doubled from December 2008 to June 2013, with unrealized portfolio values of US-focused private real estate funds witnessing a 108% increase, Europe 155% and Asia 103%. Since US-focused AUM comprises more than half of real estate assets under management, the increase in US-focused unrealized value has been the main driver of the increase in AUM figures. In dollar terms US-focused real estate unrealised value has increased from USD $135bn to $280bn from December 2008 to June 2013, representing 46% of the total AUM figure for all real estate funds.

Overall, the view for real estate funds looks positive, with unrealized values showing strong positive changes in recent quarters, which are likely attributable to improving real estate market conditions leading to increases in portfolio valuations, and fund managers putting significant levels of capital to work over recent years.

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