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Private Real Estate Fundraising by Europe and US-Based Managers - June 2013

by Farhaz Miah

  • 28 Jun 2013
  • RE

Europe-based firms have faced a challenging fundraising environment in recent times. Since the financial crisis, the number of funds that have been closed by European firms and the amount of capital raised by European managers has generally exhibited a downward trend. In 2008, a total number of 95 funds were closed by managers headquartered in Europe, raising an aggregate €17.4bn ($26.3bn). 2009 was a particularly challenging year for real estate fund managers located in Europe, with only 54 funds raising €8.3bn ($11.6bn), a 56% drop on the dollar amount from the previous year. In 2010, there were further declines as 41 funds raised by European managers raised €5.4bn ($7.1bn). Fundraising improved in 2011, as 41 real estate funds sponsored by managers based in Europe raised an aggregate €10.2bn ($14bn). However, in 2012, only 33 funds were closed by Europe-based firms, raising a total of €7.7bn ($9.9bn), a 29% drop on the dollar amount raised in the previous year. In H1 2013, only five funds have closed on a total of €0.7bn ($0.9bn) exhibiting the weakness in fundraising markets within Europe.

The trends in fundraising by US-based firms present an interesting comparison. In 2008, 176 funds were raised by US-based managers, raising a total of $98.2bn (€64.6bn). There was a steep decline in both the number of funds and the amount of capital raised in 2009, when 103 funds raised an aggregate $34.6bn (€25.2bn), representing a significant 65% decline in the dollar amount raised on the previous year. Ninety-three funds were closed by US-based firms in 2010, accumulating a total of $27.4bn (€20.6bn) in equity commitments. In line with the experience of Europe-based fund managers, US-based firms experienced an improvement in fundraising on the previous year as 108 funds raised a total of $39.5bn (€28.6bn). This positive trend continued for US-based managers into 2012, as 115 funds raised $43.9bn (€34.1bn). In H1 2013, 44 funds managed by US-headquartered funds secured $20.3bn (€15.5bn) in equity commitments, demonstrating the gathering momentum experienced by US-based fund managers.

Comparing fundraising by US and Europe-based fund managers yields some insightful observations. Although the depth of the initial drop in fundraising experienced immediately after the financial crisis was more severe in the US in comparison to the drop experienced by Europe-based firms, US-based fundraising has been gathering momentum in recent times as demonstrated by the back-to-back increase in fundraising in 2011 and 2012 coupled with the strong fundraising figures in H1 2013. Possible explanations for this divergence could be attributed to improving investor sentiment in the US as the economic recovery takes hold. Weakness in Europe-based fundraising could be attributed to deteriorating investor sentiment towards the region as weak economic growth and macroeconomic instability such as the sovereign debt crisis suppressed investor appetite. Nonetheless, it can be anticipated that investors will be paying closer attention to Europe-headquartered funds as market conditions improve and the debt crisis comes to a resolution.

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