Capital raised for European non-listed property funds fell by 60% in 2009, according to INREV's latest study. The drop reflects the slow year of activity in the market but also masks the work of fund managers preparing the groundwork for improved funds. The results of the INREV Capital Raising Survey 2009 show that fund managers raised 5.9 billion last year compared to 14.8 billion in 2008.
"The figures reflect a challenging year for capital raising but what they do not show is the positive activity of fund managers to regroup and launch funds that are in line with investors' needs following the downturn. Fund managers and investors have been engaged in due diligence for new funds and we expect to see the fruits of that in 2010," said Lonneke Löwik, Director of Research and Market Information. For 2010, capital raised by fund managers is estimated to reach 10.9 billion.
Funds called in 6.2 billion in 2009 compared to 7.5 billion in 2008. This is a drop of 17.5% but it is also the first time that more capital has been called in than raised in a single year. This indicates that there was activity in the underlying markets as capital has been put to work for new investments or been called in to support under performing funds. The ratio of uncalled capital across the study period of 2004-2009 is 26%. Core funds raised 87% of the capital in 2009 which supports the trend that investors are seeking funds with lower risk/return strategies. Core funds also called in most capital in 2009 at 91% of the total.
This shift to core had an impact on other styles with opportunity funds attracting only 4% of the capital raised. However, opportunity funds tend to raise more per fund so volumes are likely to be harder hit if fewer funds are raising. We expect investors to remain risk averse and this is reflected in the fact that core funds remain the preferred style for 2010. Just over half of the capital raised is expected to be allocated to this style," said Löwik.
Increased investor focus on the track record and expertise of fund managers is also reflected in the results with 64% of the capital raised from repeat investors. This indicates that investors are more comfortable investing with fund managers that they have previously worked with. Pension funds remained the most dominant investor group, representing 54% of the capital raised last year. Life insurance companies were the second highest with 15%. Sovereign funds were few in number but by investment volume played a significant role in non-listed real estate funds in 2009 at 11%.
German investors were the largest source of capital representing 33% of equity raised. This is partly a reflection of the sample, but with a similar sample in the 2008 survey, it is an increase of 19 percentage points.
The UK is the second largest source of capital, followed by Switzerland, and then the Netherlands. The biggest change is that the US and Canada, which were the largest source of capital in 2008 at 21%, accounted for only 0.1% in 2009. This could partly be a reflection of investors concentrating on fund issues in their home markets. These investors were also more likely to invest in higher risk/return funds which were less active in 2009.
Source: INREV
