GLOBAL - Private equity-style real estate fund managers have struggled to raise investor capital so far this year despite the emergence of fundraising optimism at the end of 2010, according to Preqin.
The data analysis company found that 17 funds raised an aggregate of $5.8bn (€4bn) in the first quarter of 2011, down from the $6.5bn raised in the last three months of the previous year.
During the three-year period between 2006 and 2008, quarterly totals were typically in excess of $30bn, but there are little indications the sector - typified by higher risk-return fund strategies - are to recover to anywhere near this level.
Earlier this year, Preqin reported that private equity real estate fund managers raised a total of $35.8bn for the whole of 2010, the lowest annual amount since 2003.
But the company's survey also reported that fund managers were increasing their capital-raising expectations for 2011 as optimism began to return, something that has yet to manifest itself in the market.
Institutional investors have become much more cautious and selective of real estate fund managers since the 2006-08 period, but there is still a large body of fund managers chasing capital.
Preqin found that the aggregate volume of capital currently being sought by private equity-style fund managers is more than three times the total raised in 2010.
Such findings support the notion there will be two distinct camps of 'winners and losers' in the real estate fund management space and an increase in industry consolidation going forward.
Andrew Moylan, real estate data manager at Preqin, said: "The fundraising market remains extremely overcrowded, with more funds in market than at any other time in the history of the industry.
"There will still be many firms that are forced to delay or abandon their fundraising efforts, and further consolidation within the private equity real estate industry is likely to take place."
Only one of the 17 funds to successfully close in the first quarter managed to raise more than $1bn, and most focused on specific sectors or geography.
"This suggests it is managers that can prove to investors they are experts in their particular strategy that are having the most success fundraising in the current environment," Moylan said.
"The private equity real estate fundraising market is still slow, but there are signs of improving investor sentiment toward the asset class.
"Although this has yet to translate into final closes, there have been a significant number of interim closes being held. This is likely to lead to an increase in final closes taking place over the coming year."