Although private real estate fundraising has demonstrated considerable growth in recent years, Preqin Investor Outlook, Real Estate H1 2014 demonstrates that a large proportion of investors remain cautious regarding their intentions for investment in the next 12 months. Nonetheless, Preqin’s Fund Searches and Mandates feature shows the wealth of investors which are planning to allocate capital to private real estate funds in the next 12 months, with 265 investors and their investment plans for the year ahead profiled in detail. The largest proportion of these are pension funds, with 31% of investors looking to commit to private real estate accounted for by public pension funds and 13% private pension funds. Endowment plans and foundations make up 13% and 6% of these investors respectively, and 8% of actively searching investors are insurance companies. Other firm types including asset managers, family offices, superannuation schemes and wealth managers make up the rest of investors looking to commit to private real estate in the coming year.
Investor appetite for higher risk funds has increased over the last 12 months, as shown in April’s edition of Real Estate Spotlight, with a considerable 59% targeting opportunistic funds in the next 12 months as of Q1 2014. This is a significant increase from Q1 2013, when 47% of investors were targeting this strategy in the next 12 months. Appetite for core funds has correspondingly declined, with only 35% of investors targeting the strategy in the year ahead, compared to 56% in Q1 2013. Value added strategies are also highly targeted, with 55% of investors seeking funds focusing on the strategy, with debt and distressed funds targeted by only 21% and 13% of investors respectively in the next 12 months.
Geographically, there is a clear tendency for investors to commit to domestic funds in the next 12 months. Seventy-two percent of North America-based investors are seeking North America-focused funds, 79% of Europe-based investors are targeting domestic investments and 64% of Asia-based investors will look to commit to funds investing in the region