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
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.