GLOBAL - Capital continues to be raised globally for opportunistic real estate funds, albeit at a slower pace, despite the credit crunch and falling economic growth, according to research from Clerestory Capital Partners.

The fund of funds manager found that 187 property funds were looking to raise a total of $155bn (€121bn) in the third quarter of 2008.

Tommy Brown, principal and co-founder of Clerestory, said: "Lots of real estate fund managers see potential once-in-a-lifetime investment opportunities coming."

Of the opportunistic funds researched, 140 small-cap funds (those raising less than $1bn in equity) were looking to raise approximately $65bn and 47 large-cap funds (those raising more than $1bn in equity) were seeking to raise $90bn.

The survey reveals that capital fundraising has slowed down considerably in the last few months, although it is likely that the smaller, less established fund managers are feeling this effect the most.

"Anecdotal evidence suggests it's only some well-established managers who have raised their target equity amounts quickly from existing investors. Many managers appear to have struggled to close the third or half of their anticipated equity raises, and some may become distressed targets themselves - especially if they are facing issues such as eroding loan-to-value ratios or debt coming due," said Brown.

Research found that an increasing number of Asian fund managers are seeking fundraising to capture investor demand for real estate across the continent, with 67 funds looking to raise $46bn in equity. Of these, 26 are India-specific and are looking for around $111bn and 10 are China-specific, aiming for $6bn.

In Latin America, five new funds looking to raise a total of $3.6bn have come onto the market, focusing primarily on Brazil and Mexico.

However, Clerestory found that most institutional investors were not focusing on new fund commitments for the remainder of the year.

Joanne Douvas, principal and co-founder of Clerestory, said: " Instead they are evaluating their existing portfolios in anticipation of investing new capital of a limited basis in 2009, after market volatility subsides."

Institutions that have seen an unintentional increase in the investment allocation to real estate because of falling values of equity and bond assets - known as the denominator effect - may lose out, says Douvas.

"Their inability to increase real estate investments next year may mean they are missing a colossal buying opportunity created by widespread market distress."