Investors are generally positive towards the long-term future of the asset class despite current problems in the fundraising market. In a survey conducted by Preqin, 84% of investors polled indicated that they would be returning to invest in the medium to long term, with a significant proportion suggesting that they will return to the market in late 2009 and early 2010.
Investors are choosing to delay making new investments until the long-term economic outlook becomes clearer, but many predict that this will happen at the end of the year. One example of an investor looking to return to the market towards the end of the year is Montgomery County Employees’ Retirement System. It feels that, at present and given the current state of the market, some managers may struggle to deploy all their capital and achieve the high returns of the past. Similarly IGFCSS, a public pension fund based in Portugal, decided to halt its private equity real estate investment program in Q1 2009 with a view to resuming in Q4 2009. There is still an appetite for investment in the asset class but many investors are simply biding their time. Confidence in the industry is returning and there is a possibility that 2010 will be a great fundraising vintage in the long term.
Although one-year real estate returns to the end of 2008 are deep into the red, over five years the asset class has outperformed every other area of private equity, with a five-year horizon IRR of 28%. This highlights the potential profit that can be made within private equity real estate and demonstrates what it is that has driven record interest in the asset class in recent years.
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