The aggregate assets under management* of the private equity real estate industry have reached an all-time high as of June 2012, with $576bn invested in real estate or held as dry powder globally. The 2013 Preqin Global Real Estate Report shows that rapid growth of the private equity real estate industry saw assets under management reach $430bn in December 2007, before declining to $418bn in December 2008 and then to $413bn in December 2009, following the onset of the financial crisis. From December 2009 to June 2012, the slow fundraising environment contributed to a gradual decrease in dry powder to its lowest level in six years in June 2012. However, over the same time period the industry’s aggregate assets under management grew by $163bn as a result of the increase in the unrealized value of firms’ portfolios, which nearly doubled from $228bn to $422bn during this period.
This increase in aggregate unrealized value was caused by a combination of improving property values and investment activity by fund managers. There were positive changes to the net asset value (NAV) in every quarter from Q2 2010 to Q2 2012, with the largest percentage increase occurring in Q4 2010 (7.3%). Private real estate firms also invested $213bn of equity in real estate assets between January 2010 and June 2012. In particular, 2010 saw a significant amount of capital deployed, with closed-end private real estate fund managers committing $108bn during the year. The pace of investment activity slowed in 2011, with $59bn of equity being invested, but picked up again in the first half of 2012 when $46bn was deployed.
*Preqin defines a firm’s assets under management as the sum of its dry powder and unrealized value of portfolio assets.