UNITED STATES - AvalonBay Communities has raised $333m (€234.2m) of equity for its latest commingled fund, AvalonBay Value Added Fund II - but this is short of the $500m goal established early in the process.

Sources say the situation is reflective of what many commingled fund real estate managers are facing in the United States as asset managers are understood to be having a difficult time attracting capital to their investment funds.

Many pension funds would prefer to wait until the real estate markets are settled before investing more capital, according to experts working with pension fund capital.

More importantly, some investors now also have less capital to place in the real estate market because of ‘the denominator affect' of plan assets dropping through poor performance in other asset classes such as stocks, bonds or unlisted equity.

A total of four institutional investors have invested in Value Added Fund II since fundraising began, one of which was the Pennsylvania Public School Employees Retirement System through a $83m contribution to the fund.

This sum was the most the pension fund could invest, as its own requirement on the fund was its commitment must not exceed 25% of the total capital raised. Had the capital raising been larger, the pension fund could have invested as much as $100m.

AvalonBay has itself made a $150m co-investment contribution to the fund so the total capitalization of the fund is around $950m, once leverage of up to 65% is added.

The Value Added Fund II is designed to invest only in apartments located in the high barrier-to-entry US markets in the Northeast, Mid-Atlantic, Midwest and West Coast of the United States but which could create value through a redevelopment, enhanced operations and/or improving market fundamentals.

For the most part, the commingled fund will be the exclusive investment vehicle of AvalonBay for a period of three years from the fund's closing date or until 90% of its committed capital is invested.

Avalon Bay is a $12.5bn public REIT investing solely in apartments.