EUROPE - Invesco is targeting small fund managers dislodged by continuing attrition in the real estate investment sector as a de facto recruitment strategy with residual income.

Simon Redman, European head of product management at Invesco Real Estate, told IP Real Estate: "There are a few funds coming to the end of their life with or without extensions, and small managers with one or two funds will struggle.

"Everyone is finding it difficult to raise funds, and small managers may find that they run out of cash flow."

In contrast to a large fund management house, the boutique business model is based on serial fund launches.

In a straitened capital-raising environment, however, boutique houses can find it difficult to raise their next fund.

More stringent demands from investors will also increase the pressure on small managers, Redman said.

As tighter regulation necessitates costly investment in processes and risk controls, investors will increase their scrutiny of fund managers' internal resources, he added.

"They're still asking about all the right things from an investor's perspective - the product, the fund manager's experience and the platform," Redman said.

"But fund managers who can't tick all the boxes will find investors much more stringent than before, and they'll really struggle.

"The only way to support the additional requirements will be to invest in infrastructure, and small fund managers won't have the resources to do it."

With minimal value in funds operated by small managers with no prospect of further income, large fund management houses are looking to acquire the best of them as a means of poaching the most successful boutique managers - and the income to support them as they wind down existing funds.

However, Redman added: "Consolidation is continuing, and it may even pick up pace. But, so far, it hasn't happened as much as I thought it would."