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Strategies Employed by Private Equity Real Estate Funds in Market

by Andrew Moylan

  • 12 Mar 2010
  • RE

There are currently 366 private equity real estate funds in market seeking aggregate commitments of $154 billion. Preqin has analysed these funds to see which strategies these vehicles will be utilizing.

Globally, opportunistic strategies will be the most commonly utilized, with 36% of the total capital targeted to be focused on opportunistic investments. 23% will be focused on debt investments and 19% on value added plays.

Many fund managers focused on North America believe that real estate debt investments offer excellent opportunities in the current climate. North American debt funds are targeting a larger percentage of total commitments than North American opportunistic or value added funds. 34% of capital targeted by North America-focused vehicles will be directed to investments in real estate debt, compared with 26% for opportunistic investments, 19% for distressed opportunities and 17% for value added investments.

Of capital being sought by funds focused primarily on Europe, 32% will be focused on value added investments, with the same percentage targeting opportunistic real estate plays. Core-plus funds, which account for 17% of the capital targeted by European vehicles, are relatively more prevalent amongst Europe-focused vehicles than amongst North America- or Asia and Rest of World-focused funds. Debt and distressed funds each account for 10% of capital targeted.

Outside North America and Europe, the majority of capital sought will be invested in opportunistic deals, with 66% of capital targeted by Asia and Rest of World funds to be focused on opportunistic investments. 14% of capital is being targeted by value added funds, 11% by distressed funds and 9% by real estate debt funds.

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