Aggregate capital raised across all private real estate fund strategies worldwide reached $92.6bn in 2014, just above the $91.8bn raised in 2013. This shows that investors are still putting considerable sums of capital to work across the asset class. However, the total number of funds that reached a final close over the course of the year has seen a notable drop-off, with 185 vehicles holding a final close compared to 240 in 2013. As investors seek out the more experienced managers with long track records, capital is becoming ever more concentrated among a handful of the larger players.
Funds focusing on Europe raised significantly more capital in 2014 ($36bn) than in 2013 ($15.4bn), with 39% of capital raised in 2014 having a primary focus on Europe, compared to 17% of capital in 2013. North America-focused fundraising witnessed a notable decline: these funds raised $44.9bn in 2014, compared to $62.5bn in 2013.
Only a third of the capital raised in 2014 was secured by opportunistic funds, a significant drop from 2013 when opportunistic vehicles accounted for 41% of capital raised. Value added funds gained a slightly greater share of the market in 2014, accounting for 25% of all capital raised globally, up from the 21% in 2013. However, debt funds made the largest gains, taking their share of the fundraising market from 17% in 2013 to 22% in 2014, a record-breaking year for capital raising. A total of 27 debt funds raised a combined $20.4bn in 2014, up from the $15.7bn raised by 29 debt funds closing in 2013.
The real estate debt fund market has seen significant growth in recent years. While the availability of bank financing for real estate investments has substantially improved, there remains demand for alternative lenders, and the strong fundraising for real estate debt funds in the last few years suggests that there also remains significant institutional demand for exposure to real estate debt investments.