Asia Pacific investors become primary source of capital - Inrev

This comes at the expense of European investors who saw their share of capital raised decline to 30% in 2022. North American investors contributed 34%.

With ongoing global uncertainty surrounding investment decisions, the reversal confirms the 2023 Investment Intentions findings that European investors are taking a more cautious approach than their peers. The shift is largely the result of differing monetary policies and the fact that Asian Pacific investors are more under-allocated to real estate than their peers.

Central banks in the US and Europe tightened their monetary policies while monetary conditions across the Asia Pacific region are looser, which has had a direct impact on allocations, due to the denominator effect. The end result is a notable narrowing in the gap between target and current real estate allocations for many investors globally, however the average gap is still a significant 200 bps for Asian Pacific investors.

In 2022, capital raising activity remained strong despite the uncertain market conditions, with €246 bn of new capital raised for investment in non-listed real estate globally.

This means only an €8 bn decline from the capital raised in 2021, when a record high €254 bn was raised following the height of the Covid-19 pandemic. This resilience comes in the face of sharp market deterioration in the latter half of 2022. However, this is likely a result of strong capital raising activity taking place in H1 2022, given the change in sentiment and rapid interest rate increases across the globe in the second half of the year.

The weak H2 2022 non-listed global real estate performance results and ongoing market uncertainty are starting to negatively feed into the near-term capital raising outlook. Over the next two years, a lower number of market participants (62%) are expecting to maintain or increase capital raising activity – a sharp contrast when compared with 2021 (75%). The number of respondents expecting to decrease their capital raising activity in the next two years is the highest since 20181, at 8% for 2022.

Pension funds and insurance companies continued to decline in importance as a source of capital, with the combined contribution of both groups falling to 53% of the total. Equally, for the very first time in the history of the survey, the combination of pension funds and insurance companies contributed less than 50% of the total capital raised. This supports the view that European investors are less active, as they contribute the most to pension funds and insurance companies in this survey.

Managers in North America had the most diverse outreach of all, with less than 50% of the total capital raised targeting their home region in 2022. Outside of their region, North American investors favoured global strategies (34%). European investors also showed a notable interest in global strategies with 10% of their 2022 allocations, just behind 11% targeting North American strategies.

However, in Asia Pacific and Europe, domestic investors dominated capital raising activity in their respective regions – as in previous years. Managers located in Asia Pacific accounted for the highest share of local capital, with 83% of the total raised in 2022. While European managers raised 76% of the total capital targeting Europe over the same period.