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29 pc Slump in Realty Focusd PE Funds 04/08/2010
Money raised by realty focused private equity funds tanked to a six year low of USD 7.3 billion across the globe in April-June period of this year as institutional investors remained hesitant about committing capital. According to a report by global research firm Preqin, “this was the lowest quarterly fundraising total since Q3 2004, when 30 funds raised an aggregate USD 6.1 billion,” The report noted that private equity real estate funds are still struggling to raise capital in the current economic environment.

In the April-June quarter, 20 real estate funds made aggregate commitments of USD 7.3 billion, down 29.12 per cent from USD 10.3 billion in the year-ago period. Besides, the aggregate set target of raising funds has also steadily fallen in recent quarters, as fund managers have started setting more modest targets. “The number of funds currently in market has fallen in Q2 2010; this is due to a number of fund managers abandoning their fundraising efforts because of difficulty in garnering investor commitments,” the report added. It is clear that the fundraising environment remains extremely competitive and that the recovery, which many predicted, is yet to occur.

“There has been a severe decline in the performance of real estate funds, and consequently the performance of many institutions’ real estate portfolios, since the onset of the economic downturn. This has led to a large number of investors re-evaluating their real estate strategy, with a number increasingly looking towards core investments,” Preqin said. During 2009, 93 funds committed USD 40.50 billion, while in 2008, 228 funds raised an aggregate USD 134.30 billion.

North America focused funds raised USD 5.4 billion, accounting 74 per cent of capital during the quarter under review, four Asian and rest of the global funds stood at USD 1.2 billion while five European funds garnered USD 70 million, it said. Nevertheless, there have been some encouraging signs for firms raising private equity real estate funds. Of all the funds that have closed during 2010, around 20 per cent have exceeded their fundraising targets. While in the corresponding period in 2009, the figure was six per cent.
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