Share of Cap­i­tal Raised for Funds of Funds Dou­bled

The share of to­tal cap­i­tal raised for non-listed real es­tate funds of funds dou­bled in 2017, show­ing that the funds re­main im­por­tant ve­hi­cles that of­fer in­vestors sig­nif­i­cant di­ver­si­fi­ca­tion op­tions, ac­cord­ing to the lat­est ANREV / INREV Funds of Funds st

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In to­tal, US$160.2 bil­lion of fresh eq­uity was raised for non-listed real es­tate in 2017, with US$8.5 bil­lion or 5.2% des­tined for fund of funds. This is a record level of new cap­i­tal and a sig­nif­i­cant jump from the US$3.2 bil­lion or 2.5% of to­tal cap­i­tal that was raised in 2016. Funds of funds de­liv­ered pos­i­tive re­turns to their in­vestors across dif­fer­ent styles, struc­tures, re­gional strate­gies and size. The re­sults show that one in seven in­vestors plan to in­crease their al­lo­ca­tions to funds of funds over the coming two years. The sec­tor achieved an an­nual re­turn of 5.1% over 2017, slightly down on the 6.2% achieved pre­vi­ously.

global strate­gies dom­i­nate

Funds of funds with a global strat­egy, com­prise the largest share of ve­hi­cles in the uni­verse, both by num­ber and size. Global strat­egy ve­hi­cles make up just un­der 50% of the over­all ve­hi­cles and rep­re­sent 78.6% of to­tal NAV. All re­gional strate­gies de­liv­ered pos­i­tive re­turns, but those tar­get­ing Asia Pa­cific es­pe­cially so. Af­ter a few years of sub­dued per­for­mance, Asia Pa­cific funds of funds posted a re­mark­able come­back with re­turns of 15.1% in 2017, a strong come back from the 3.3% recorded in 2016. In com­par­i­son, Euro­pean and global funds gen­er­ated 6.6% and 4.4% re­spec­tively, a sim­i­lar per­for­mance to last year.

Con­fi­dence in Core ve­hi­cles

The funds of funds uni­verse is al­most evenly split across the three main in­vest­ment styles: core, value added and op­por­tu­nity. How­ever, core funds are much larger in size than the other two, mak­ing up just over four fifths or 83.1% of to­tal NAV. They also in­vest on av­er­age in 20 ve­hi­cles and 16 man­agers, which is dou­ble the num­ber for value added and op­por­tu­nity funds of funds. Amélie De­lau­nay, Di­rec­tor of Re­search and Pro­fes­sional Stan­dards at ANREV, com­mented, “The scale of the re­turns in Asia Pa­cific in 2017 is sig­nif­i­cant, demon­strat­ing their in­creas­ing ap­peal in the re­gion. The re­sults gen­er­ally re­flect good health within the funds of funds seg­ment, show­ing that they con­tinue to of­fer smaller in­vestors in par­tic­u­lar, an im­por­tant di­ver­si­fi­ca­tion tool ANREV is the Asian As­so­ci­a­tion for In­vestors in Non-listed Real Es­tate Ve­hi­cles, a not-for-profit or­gan­i­sa­tion based in Hong Kong.

Non-listed core real es­tate funds of­fer the di­ver­si­fi­ca­tion ben­e­fits of real es­tate as part of a multi-as­set port­fo­lio and can pro­vide in­vestors with an ac­ces­si­ble and trans­par­ent route to gain ex­po­sure to the sec­tor.

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