Opportunistic Real Estate Funds Hit Cyclical Record

Opportunistic Real Estate Funds Hit Cyclical Record

Private real estate funds are putting the pedal to the metal when it comes to opportunistic vehicles, according to the latest report from London-based research firm Preqin. Out of the total of $37.5 billion globally raised by closed-end private real estate funds raised in the third quarter of this year, $28.2 billion, or 75 percent, were dedicated to opportunistic funds, Preqin’s numbers show. This was also the highest dollar volume raised by opportunistic funds year-to-date in a seven-year period.

Out of the 10 biggest real estate funds closed during the third quarter, seven were dedicated to opportunistic investments. Among these was the largest real estate fund ever closed—Blackstone’s Real Estate Partners VIII, which totals $15.8 billion. The average size of opportunistic funds has grown in general, to $1.47 billion year-to-date from only $460 million during all of 2014.

“With concerns over pricing core assets, many institutional investors have moved up the risk curve in search of returns,” said Andrew Moylan, head of real assets products for Preqin, in a statement. “With more mega funds currently being marketed, and institutional investor appetite for opportunistic funds still high, fundraising is likely to remain strong in the coming quarters.”

The whole picture

Out of the total of 33 global closed-end real estate funds closed in the third quarter, 18 funds totaling $29.3 billion are focused on North America. Seven of the funds, totaling $2.9 billion, are focused on Europe, and three funds totaling $4.0 billion, are focused on Asia.

When it came to investment strategy, only one fund closed in the third quarter, totaling $300 million, was dedicated to core-plus assets. There were two funds, totaling $500 million, dedicated to core assets, but the bulk of investors’ focus was on opportunistic strategies, value-add (12 funds totaling $5.1 billion), debt (seven funds totaling $2.8 billion) and distressed (two funds totaling $700 million).

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