In a survey conducted by alternative asset research company, Preqin, it was revealed that investments in private real estate funds were growing and investors' confidence in the sector was returning.
Private equity real estate funds are investments consisting of debt and equity in the form of properties. Under these funds, a person can lease and develop the properties that one has invested in. These funds are usually made by pooling in capital from various investors.
Investment in a private real estate fund can be made through two crucial strategies - Core Plus and Value Added Strategy. A Core Plus fund strategy involves moderate risk as it is usually a renovation or remodeling project. Value Added funds are more risky as buying, developing and selling a property are involved.
According to the results of the survey, more than 53 percent of the investors are looking forward to making new pledges towards private real estate funds. Around 54 percent of these investors will be adding more capital to the funds while 3 percent of their cohorts have claimed otherwise.
The report stated that around 83 percent of Asian Investors are willing to invest in private real estate funds while 39 and 48 percent of investors from Europe and North America are anticipating investing in the funds, respectively.
The report also suggested that investing in Value Added funds, rather than Core Plus funds would yield more returns. It was analyzed that around 45 percent of the investors will put in their resources in Core Plus funds while 55 percent will invest in Value-Added funds.
The report observed that enthusiasm about investing in the private funds comes as a result of the steady performance of these funds throughout 2012.
"The results of this study are encouraging for fund managers marketing real estate funds and suggest the fundraising environment will likely improve during 2013. However, with a large number of funds in the market and many investors still expecting not to be active, fundraising will remain challenging in the coming months." Andrew Moylan, manager of real estate data at Preqin, told Eprop.
