There are strong signs that investor confidence in private real estate funds is returning, with 49% of investors having made new commitments in 2012, and 53% planning to make new commitments to the asset class in 2013. The improvement in the performance of private real estate has encouraged some institutions to return to the asset class, while an increase in the rate of distributions from their existing commitments means that many investors also have more capital available to invest. The majority (54%) of investors also expect to commit more capital to the asset class in 2013 than they did in 2012.
While a large proportion of investors focused primarily on core investments following the downturn, many are now increasingly looking at opportunities higher up the risk/return spectrum. Investor interest in core remained strong during 2012, but there was also increased appetite for core-plus, value added and opportunistic strategies.
Real estate remains an important part of many sophisticated investors’ portfolios, with 93% of institutional investors active in the asset class targeting exposure to property of at least 5% of their total assets.
The use of separate accounts is also continuing to increase, with some investors viewing this as a way to invest significant amounts of capital while retaining a greater level of control than they might have with a commitment to a blind-pool fund.
More information about the real estate investment outlook for H1 2013 can be found here.