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Real Estate private equity hits fund raising Print E-mail
Friday, 15 September 2006
NEW YORK - Real Estate private equity funds are in for another record-setting year as stable, healthy returns continue to attract investors.   By the end of August, 46 real estate private equity funds had closed their fund-raising doors with $32 billion raised among them. With 58 new funds still on the road targeting another $27 billion, 2006 is bound to break last-year's record of $45 billion, the report said.

The attractive risk-return trade-off has prompted many institutional investors to increase their allocation to real estate funds. A survey of the top 350 investors in real estate funds worldwide showed that 68 percent intended to raise their allocation to real estate funds, while only 4 percent said they would reduce their allocation.

"There clearly is a huge appetite for real estate as the return justify them to continue to place money in real estate,", said Mark Grinis, Global Real Estate partner in Ernst & Young, which advises private equity funds.

The average current allocation to real estate among those investors is 5.7 percent of total assets, compared with a target of about 7.1 percent.

Private Equity funds are looking afar for real estate opportunities -- India, Korea and Japan. Since 2004, 23 Asian-focused funds have raised $9 billion, with $4 billion of that in 2006, the report said.  Real estate funds have been able to turn in strong performances while offering low risk to investors, such as pension funds, which comprise about 26 percent of the investors, said Tim Friedman, Private Equity Intelligence spokesman. Other investors include endowments and wealthy individual.

The best performing real estate private equity performers pale to the 100-plus percent internal rate of return, or IRR, -- the rate the investors made on their money adjusted for the time frame of the investment -- of other private equity funds. But on the flip side, the worst real estate private equity performances were not as bad, the report said.

Edwina Baniqued

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