EUROPE - The volume of capital raised through European non-listed real estate funds fell by 60% in 2009, according to the European Association for Investors in Non-listed Real Estate (INREV).

The association has released the figures from its latest Capital Raising Survey, which it would have announced at its annual conference in Venice this week, had it not been cancelled because of air travel disruption caused by the volcanic eruption in Iceland.

The annual survey shows fund managers raised €5.9bn in 2009, compared to €14.8bn in the previous 12-month period.

INREV said the finding reflected the slow year of activity in the market but also masked the work of fund managers preparing the groundwork for improved funds.

"The figures reflect a challenging year for capital raising but what they do not show is the positive activity of fund managers to regroup and launch funds that are in line with investors' needs following the downturn," said Lonneke Löwik, director of research and market information at INREV.

"Fund managers and investors have been engaged in due diligence for new funds and we expect to see the fruits of that in 2010," said Lowik.

INREV has forecast capital raised by fund managers in 2010 will reach €10.9bn.

The survey also shows funds made €6.2bn in capital calls last year, compared to €7.5b in 2008 - the first time more capital had been called in than raised in a single year.

This finding suggests there was activity in the underlying markets as capital has been put to work for new investments or been called in to support underperforming funds.

The ratio of uncalled capital across the study period of 2004-2009 is 26%.

Core funds raised most (87%)  capital in 2009, validating market observations that investors are flocking towards vehicles with lower risk-return strategies.

Core funds also called in the most capital in 2009, at 91% of the total.

This shift to core had an impact on other styles, with opportunity funds attracting only 4% of the capital raised.

"We expect investors to remain risk-averse and this is reflected in the fact that core funds remain the preferred style for 2010," Löwik said.

Increased investor focus on the track record and expertise of fund managers is also reflected in the results with 64% of the capital raised from repeat investors.

This suggests investors are more comfortable investing with fund managers they have previously worked with.

Pension funds remained the most dominant investor group, representing 54% of the capital raised last year.

Life insurance companies were the second highest with 15%, while sovereign wealth funds were few in number but by investment volume played a significant role in non-listed real estate funds in 2009 at 11%.

German investors were the largest source of capital representing 33% of equity raised. This is partly a reflection of the sample, but with a similar sample in the 2008 survey, it is an increase of 19 percentage points.

The UK is the second largest source of capital, followed by Switzerland, and then the Netherlands.