GLOBAL - More than half of the total capital raised for emerging market private real estate investments in 2011 was committed to fund managers based outside established markets, such as North America and Europe, a new survey has found.

According to a survey conducted by Preqin, the level of capital for emerging markets raised by local general partners (GPs) has increased significantly in 2011 to 59%, compared to 2005 when only 18% of the same capital went to managers based in emerging countries.

However, Preqin also revealed that the 2011 figures represent an important decrease from 2010 when a record 77% of capital was committed to emerging market-based managers.

Andrew Moylan, manager of real estate data at Preqin, said that the shift towards investors committing to local emerging market fund managers highlights the increasing sophistication of the real estate industry in many emerging market regions.

"Rapidly growing regions such as Asia have seen an increase in the number of local fund managers launching funds over the past few years, as well as the number of both domestic and international institutional investors that are turning to these firms for their local expertise", he said.

In 2011, the majority of capital was raised by Asia-focused funds with $4.1bn (€3.3bn), while Latin America-focused funds garnered $3bn and $0.4bn was raised by fund managers based in Central and Eastern Europe, according to Preqin.

The survey therefore found that 33% of private real estate fund investors have a preference for investment in Asia, while 5% target Latin America and Central & Eastern Europe respectively.

In addition, the survey showed that the bulk of capital raised for emerging market-focused real estate funds in 2011 has been for country-specific or regional funds, as opposed to more general global/pan-continental vehicles.

Moylan nonetheless stressed that, despite "steady appetite", the short-term outlook suggests a challenging fundraising environment for emerging markets, with many investors not actively looking for new investments or focusing on markets closer to home but remained confident.

"In the medium to long term, however, it seems likely that emerging markets-focused offerings will become more important to the private real estate market as a whole."

Topics