Real Estate Fund of Funds Managers Switch Strategy

by Andrew Moylan

  • 18 Jun 2010
  • RE

A considerably higher proportion of real estate fund of funds managers with new vehicles currently in market are seeking to invest in distressed, debt and core-plus funds than their counterparts that closed funds of funds between 2008 and May 2010.  Concurrently, opportunistic and value added funds are being targeted by fewer managers, signifying a clear change in investment strategies. 

A Preqin survey of managers of funds of funds currently in market shows that 52% plan to invest in distressed real estate funds, compared to just 14% of those that closed in the period 2008 – May 2010. 30% are targeting core-plus funds, an increase from 10%, while 26% are seeking investments in debt funds, up from 14%. 48% are targeting value added funds, a figure that stood at 72% for funds that closed between 2008 and May 2010, while 57% will invest in opportunistic funds, down from 86%.

73% of funds of funds invest in first-time funds, while a further 17% would consider doing so, highlighting that funds of funds are important backers of emerging mangers.

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