It is still a tough environment in which to raise capital. But the diversity of products coming to market shows that there is room for the fund management industry to innovate. Richard Lowe reports

It is clear that the capital-raising market has not yet returned to normality. This ‘normality', when it comes, is unlikely to resemble the years leading up to the crisis, when investors queued up to invest with fund managers, but one would assume it would involve a greater number of funds closing more frequently with larger volumes of commitments.

As Preqin's latest global fundraising survey for private-equity-style real estate funds shows, the opportunistic end of the funds spectrum is still suffering. The alternative investment data company revealed that, while the third quarter of 2010 saw more capital raising (€6.2bn) than the two previous quarters, you need to go back to 2005 to find a similar level of fundraising.

But you need to go further down the risk curve to see the most interest and activity from institutional investors. Over the past two months there have been a number of significant capital raisings and mandate wins. Perhaps the most high-profile example was by the National Pension Service (NPS) of Korea as part of its ongoing global investment programme. In September NPS, the fifth-largest pension fund in the world, committed a further $400m (€287m) to Rockspring Property Investment Managers to invest in European real estate markets. The discretionary core-plus mandate is in addition to Rockspring's existing mandate started in 2006.

This was followed soon after by the news that NPS had hired the Townsend Group to invest $300m of its capital in the Americas. The mandate will focus primarily on the US market, but also look at opportunities in Canada, Brazil and Mexico. Townsend will look to recapitalise distressed funds, acquire interests in funds through the secondary market and enter into joint ventures and club investments.

Both mandates came soon after Malaysia's first-pillar pension scheme had selected ING Real Estate Investment Management and Deutsche Bank subsidiary RREEF to assist in investing £1bn (€1.1bn) in the UK real estate market. It is the first time the $112bn Employees Provident Fund of Malaysia has invested outside its domestic property market.

The news showed that global interest in the UK is not on the wane. Invesco Real Estate also successfully raised capital to invest in the UK, securing €75m from four German institutional investors, allowing it to make a first closing on its latest UK real estate fund.
But the biggest talking point recently has been the US market. A new report from DTZ forecasts that global capital flows into US real estate will double in 2011, and a number of European pension funds are looking into investment opportunities in the country. Denmark's ATP has committed capital to three core US funds, while German pension fund WPV and Denmark's Sampension are both interested in making new allocations to core US property.

Multi-family residential appears to be one of the most popular sectors given its potential to remain strong during economic weakness. It then comes as no surprise that Henderson Global Investors is looking to continue its successful CASA Partners US Multi-Family Housing Fund series. The fund manager is targeting $400m of equity plus gearing to invest $1.1bn in the sector in what would be the fifth fund in the long running series.

But for many investors, core European property is still the name of the game. Aberdeen Asset Management and ING REIM have attracted more than €200m for a number of their core European products. More than half of this sum has gone to Aberdeen's Nordic real estate funds, including its pan-Nordic vehicle and its country-specific funds in Denmark, Finland and Norway. The company has also seen €35m invested in its European Balanced Property Fund by Dutch pension fund Progress Unilever, which is re-investing capital in European funds generated from selling its direct Dutch portfolio. ING REIM has raised €67m from institutional investors for its European Property Strategy, an open-ended platform that allows investors to gain a diversified exposure to the firm's 14 non-listed core property funds in Europe.

Tristan Capital Partners, the start-up fund management business established by Ric Lewis, is also seeking to raise around €500m to invest in core European real estate. It will be the first blind pool vehicle launched since Lewis left AEW Europe in 2009 - Tristan already manages existing funds for AEW Europe.

But fund managers are beginning to think beyond offering core products. First Property Group, which has a long track record of investing in Poland and neighbouring markets in central and eastern Europe, has launched its latest vehicle. It will be the sixth Polish fund launched since 2000 and follows a period where the fund manager concentrated on investing in the region on behalf of the Universities Superannuation Scheme (USS). With the USS mandate now fully invested and First Property's recently launched UK real estate fund up and running, the company has already begun investing its own capital in the Polish market and is hoping to raise third-party capital along the way.

Invesco Real Estate, meanwhile, believes the time is right for the hotel sector in Europe. The fund manager has bought a number of assets this year for its inaugural pan-European hotel fund, but is keen to continue acquiring by launching a second fund. It has identified a €168m seed portfolio to help attract interest from investors.

Elsewhere, LaSalle Investment Management has raised £100m of institutional capital for its UK Special Situations fund, which will target mezzanine, preferred equity and debt opportunities by working with banks and borrowers. And Angelo, Gordon & Co has raised $625m for its second Asia real estate fund, which it plans to invest in the region, primarily in China, over the next four years.

But arguably two of the most interesting funds have been launched in the UK. The inProp UK Commercial Property Fund is the first ever pure property derivatives fund and is to be used by a number of major institutional investors: Scottish Widows Investment Partnership on behalf of the SWIP Property Trust; PRUPIM; and the Skandia Property Fund, advised by ING REIM.

The second is the Liquid Property Fund launched by Pacific Real Estate Capital Partners. Managed by former Hermes CIO and Towers Watson consultant Steven Grahame, the fund will invest in real estate instruments and securities to give investors a globally diversified property exposure at a low cost and with high liquidity.