GLOBAL - Institutional investors are holding back from private equity real estate funds, preferring to hold on to their capital or channel it into direct investment and joint ventures, according to Preqin, the private equity data firm.

A poll of 160 investors - including 41% public pension funds and 14% private-sector pension funds in Europe, North America and Asia - found that less than a quarter (24%) had committed capital to a private property fund in the first half of 2010.

Despite the current semi-stasis, 58% of investors plan to invest in funds over the next 12 months.

Andrew Moylan, real estate data manager at Preqin, said: "The fundraising market still remains very crowded for fund mangers seeking institutional investors."

A majority of investors - 73% - said they had so far failed to reach their target allocation to the asset class this year. 

In terms of fund style, the largest group of investors is targeting core (43%).

However, the report noted continuing investor interest (38%) in opportunistic vehicles seen as being able to generate strong returns by investing in distressed assets and debt.

In contrast, continuing uncertainty over property valuations and the traditional value-added model of renovation and repositioning "is not seen as that attractive", Moylan said.

The report also identified a growing bias toward emerging markets (45%) as investors up their intentions to invest in Asian markets over the next 12 months.

"But most investors remain cautious," Moylan added.

"They will not be rushing to make commitments and will instead wait for a suitable opportunity to be presented."


 

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