Opportunistic funds have continued their robust fundraising activity into the third quarter of 2015, as funds that held a final close in the period raised an aggregate USD28.2 billion.
This represents 75 per cent of the total amount of capital raised by private real estate funds in Q3, and far outstrips the USD7.2 billion raised by opportunistic funds closed in Q2. Seven of the top 10 biggest funds closed in the quarter, and all of the top 10 biggest funds ever closed, target opportunistic investments.
The average size of opportunistic funds has also increased dramatically in the past year, from USD460 million for funds closed in 2014, to USD1.47 billion for funds closed this year so far. This level of activity looks set to continue, as there are currently 125 opportunistic funds in market seeking a combined USD46.9 billion, including 6 opportunistic funds with capital targets of USD1.5 billion or more.
Global Totals: 33 closed-end private real estate funds closed globally in Q3, raising an aggregate USD37.5 billion. This is a decline in number from the 58 funds closed in Q2, but represents a 29 per cent increase in the aggregate capital raised.
Regional Focus: 18 North America-focused funds raised a combined USD29.3 billion in Q3, while 7 Europe-focused funds raised USD2.9 billion, down from USD12.8 billion in Q2. A total of USD4.0 billion was raised by 3 Asia-focused funds, making the average Asia-focused fund size for funds closed in Q3 USD1.3 billion.
Time on the Road: The average time taken for a fund to reach its final close in Q3 was 16 months, down from a 21 month average in Q2, and the 19 months taken on average for funds closed in 2014.
Fundraising Targets: 62 per cent of funds closed so far in 2015 met or exceeded their fundraising targets, slightly above the 60 per cent of funds that did so in 2014.
Biggest Fund: After closing to institutional investors in Q1 2015, having raised USD14.5 billion, Blackstone Real Estate Partners VIII raised additional capital from retail investors, and held a final close in Q3. At USD15.8 billion, it is the largest private real estate fund ever to close.
Funds in Market: There are currently 437 private real estate funds in market, seeking a combined USD152 billion in capital. This is an increase from the 416 in market at the end of Q2, although the aggregate target capital amount is unchanged.
Dry Powder: The amount of unspent capital available to real estate fund managers in the third quarter has not matched the rapid growth seen in H1 2015, and stands at USD251 billion as of the end of Q3. For more information and analysis, please see the following factsheet. “The first three quarters of 2015 have seen more capital raised for opportunistic real estate funds than in any full year since the Global Financial Crisis.” says Andrew Moylan (pictured) Head of Real Estate Asset Products at Preqin. “With concerns over pricing core assets, many institutional investors have moved up the risk curve in search of returns. Opportunistic funds account for more than half of all capital raised by real estate funds closed so far in 2015; several of the largest players in the real estate private equity industry have closed such funds this year, including the largest ever real estate fund, managed by Blackstone Group, and offerings from Lone Star Funds, Starwood Capital Group and Carlyle Group. 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.”
Source: Property Funds World