27 March 2017, Berlin – More than four fifths offund managers raised capital for deployment through non-listed real estate vehicles in 2016, with investors committing a total of €122 billion – a modest 1.4% decrease on the previous year.
However, the Capital Raising Survey 2017 – published today by INREV, ANREV and NCREIF – still reveals a continuing interest in the asset class from institutional investors across Europe and beyond. This is reflected by the €500 billion that have been invested in non-listed real estate since 2012.
Almost half of the total capital raised (46.5% or €56.6 billion) was for vehicles with a European strategy. By contrast, 26% of total capital (€31.6 billion) was raised for North American-focused vehicles and 17.8% (€21.7 billion) was raised for vehicles with an Asia Pacific strategy – a significant uplift from last year’s €16.9 billion.
Despite the global reach of the survey, the majority of investors (49.6%) were domiciled in Europe. Pension funds and insurance companies were the dominant investor type, representing a combined 62.5% of the total.
‘While the numbers are still significant, the drop-off in total capital raised seen in this year’s survey is interesting. It might reflect the challenges of deployment and a more generally cautious approach to capital raising from fund managers,’ commented Henri Vuong, INREV Director of Research and Market Information.
Trust matters
The largest share of new capital raised came via fund managers’ existing relationships indicating the importance of trust and a growing alignment between fund managers and investors. This accounted for €94.3 billion of the total capital raised and was particularly prevalent among fund managers in North America where direct relationships accounted for 90.5% of all capital raised. In Europe, it was 70.7% and 59.9% in Asia Pacific.
Fund managers in Asia Pacific were alone in their continued significant use of placement agents who accounted for 25.6% of the total equity raised in this region. In North America and Europe this percentage was less than 5%.
Diversification indicators
In line with previous years, the largest share of capital (49.9%) was raised for non-listed real estate funds. However, the spread of vehicles reflects the growing choice of products and maybe also investors’ desire for greater diversification. Separate accounts took 23.4% of all new capital; joint ventures and club deals attracted 13.8% of capital; non-listed debt products, separate accounts investing in indirect vehicles, and fund of funds picked up 6.9%, 3.5% and 2.5% respectively.
Changing geographic and sector preferences might also reflect the increased desire for spreading investment risk. Non-listed real estate funds with a global strategy were deemed the most popular, attracting 48% of total capital. Also, two thirds (65.5%) of capital raised for European non-listed real estate funds was for vehicles targeting a multi-country strategy – a significant shift from 2015 when over half of the capital raised (53.3%) was destined for single-country vehicles.
One of the most striking results was the dominance of retail funds, which attracted 14.7% of capital – more than a third of the total for single-sector funds – displacing residential (with 6.5%) from its top slot in 2015. As to other sectors, office took 5.8% of total capital, with industrial / logistics at 4.1% and hotels at 3.4%.
Vuong added ‘The continued flow of capital into real estate is a clear vote of confidence in the asset class. However, these results also signpost some potentially significant, if subtle, shifts in the market. Investors could be sensing a turning point on the back of the longest cycle we’ve witnessed in recent years.’
– Ends –
For further information, please contact:
Johlyn da Prato, johlyn.daprato@inrev.org | +31(0)20 2358603
Justin St Clair-Charles, inrevteam@firstlightpr.com | +44 (0) 7769 64 059
Hannah Thompson, inrevteam@firstlightpr.com | +44 (0) 7875 292187
Notes to Editors
About the Capital Raising Survey 2017
This is the eleventh annual survey exploring fund managers’ capital raising activities. It is the third year-running that the survey has been carried out on a global basis and has been conducted jointly by INREV in Europe, ANREV in Asia Pacific and NCREIF in the US.
The survey records details of capital raising activity subdivided by region, product type and investment strategy. Data was collected at both manager and vehicle level; and figures in the report are quoted as at 31 December 2016, unless otherwise stated.
The 2017 survey comprises 162 fund managers which represents a 6% increase on the number of participants in the 2016 survey.
About INREV
INREV, the European Association for Investors in Non-Listed Real Estate Vehicles, was launched in May 2003 as a forum for investors and other participants in the growing non-listed real estate vehicles sector. The association represents and reflects an industry with a total value of €2.1 trillion and INREV members deliver €300 billion of stimulus to the real economy of Europe.
INREV members include around 75 of the largest institutional investors as well as 40 of the 50 largest real estate fund managers, plus banks and advisors across Europe and elsewhere. Forty new members joined INREV in 2016.
The non-profit association is focused on increasing the transparency and accessibility of non-listed vehicles, promoting professionalism and best practice, and sharing knowledge. It is based in Amsterdam, the Netherlands.
Follow us on Twitter: https://twitter.com/inrevnews