Co-investments are becoming increasingly popular among private real estate fund managers and institutional investors, according to a survey by Preqin.
It said it found an increasing prevalence of co-investments within the asset class, with 41% of surveyed fund managers offering co-investment rights to more than 80% of their investors last year.
The figure is up 9% on 2014.
While 41% of fund managers did not offer any investors co-investment rights in 2014, that proportion fell to 29% last year.
Andrew Moylan, Preqin’s head of real estate products, said: “Real estate fund managers are recognising how important co-investment rights are becoming to investors.
“Most managers feel that offering co-investment rights is important during fundraising, and the vast majority currently offer or are considering offering co-investment rights to their investors.”
Managers are offering these rights not just to a select few but most or all of the investors in their funds, Moylan said.
“The extent to which these rights are to be taken up is increasing as well,” he said.
“Although larger investors are still more likely to co-invest, a greater proportion of investors have made co-investments in 2015 than in the year before.”
Preqin’s report said the key benefits of co-investments identified by managers included building stronger relationships with investors, accessing additional capital for deals and improving the chances of a successful fundraise.
Co-investments also represented an increasing proportion of equity in deals completed last year, with 72% of surveyed fund managers reporting that co-investment capital made up 40% or more of the equity in their 2015 deals – up from 54% that said the same in 2014.
No manager with co-investments said co-investment capital made up less than 20% of their 2015 deal equity, compared with the 18% that reported that in 2014.
Larger investors are more likely to participate in co-investments, Preqin said.
Less than 20% of investors with less than $1bn (€918m) in assets under management will co-invest, compared with the majority of investors over $50bn.
