The number of investors planning to increase their allocation to non-listed real estate funds in Europe has dropped to its lowest level in five years as the effects of the global financial crisis continues to ripple through the property sector.

The number of investors planning to increase their allocation to non-listed real estate funds in Europe has dropped to its lowest level in five years as the effects of the global financial crisis continues to ripple through the property sector.

The 2009 Investment Intentions Survey conducted by the European Association of Investors in Non-Listed Real Estate Vehicles (INREV) indicates that the intention among investors questioned to increase their allocation has fallen to 63% compared to 82% last year. Sixty percent of investors who took part in the 2009 survey said they didn't expect market sentiment to recover before 2011. Over 50% of both fund managers and fund of fund managers, in contrast, said they were pinning their hopes on 2010.

But more than 30% of fund managers and over 20% of fund of fund managers said they believed that market sentiment won't pick up until 2011. A further 20% of fund of fund managers were more pessimistic and suggested the upturn would not take place until 2012.

Asli Ball, vice president of GIC Real Estate, presented the results of the survey at an INREV event in London on 29 January. She said the reduced allocation expectation among investors had to be seen in the context of a reduction across all sectors of the real estate sector, apart from direct property. 'The more conservative view among investors may reflect concerns about the denominator effect across a multi-asset portfolio,' she added.

Ball said there has been a marked shift in risk appetite among investors in the last 12 months. Some 37% of the investors surveyed expressed a preference for funds with a core investment style compared to 5% who took the same view in 2008. The shift in attitude was at the expense of valued-added funds which were preferred by only about 25% of investors. The amount of investors favouring riskier opportunistic style funds remained stable, reflecting the appetite among many investors for higher risk/return opportunities despite the market volatility.

INREV's survey covers fund managers, fund of fund managers and institutional investors in non-listed property funds. The survey attracted 114 respondents, which comprised 30 investors, 13 fund of funds managers and 71 fund managers. Of the total respondents 104 were INREV members.