2014 fundraising off to a great start
Fundraising activity started the year with a bang as 23 funds wrapped up their marketing efforts in the first quarter with an aggregate $21.7 billion, according to data collected by the Institutional Real Estate FundTracker database. It is the highest first quarter total since 2008 when fund sponsors raised $25 billion. The first quarter 2014 volume dwarfs the totals recorded during the same three-month period in recent years: $8.1 billion in 2013 and $11.9 billion in 2012. In addition, the quarterly volume is a strong follow-up to the fourth quarter 2013 total of $26.8 billion, and it marks the third consecutive quarter that investment managers have raised in excess of $20 billion.
The data also indicates the tide has shifted and waves of capital are now flowing to Europe, where value-oriented investors are banking on improving economies to bolster property fundamentals and generate healthy returns. Funds focused on property markets in Continental Europe and the United Kingdom accounted for 50 percent of the fundraising dollar volume, partly due to $7.1 billion raised by The Blackstone Group for its Blackstone Real Estate Partners Europe IV. In addition, three debt funds focused on the region — two sponsored by M&G Investments and one sponsored by LaSalle Investment Management — each raised in excess of $1 billion.
Conversely, as investors flock to Europe in search of higher returns, fundraising by funds focused exclusively on the United States represented only 17 percent of the quarterly dollar volume. Most of the funds targeting U.S. properties were smaller in size, except for Walton Street Capital’s Fund VII, which raised $1.4 billion. Only two Asia-focused funds closed during the period — Indiareit Fund Advisors’ Indiareit Domestic Fund V and Infrastructure Development Finance Corp.’s IDFC Real Estate Yield Fund — and both are exclusively targeting opportunities in India.
Although there are approximately 900 funds currently in the market seeking to raise capital totaling nearly $550 billion, the Institutional Real Estate FundTracker database registered 48 new fund launchings during first quarter 2014. Several of the more notable announcements include Lone Star Funds’ Lone Star Fund IX, which is seeking to raise $7 billion; TPG Capital’s TPG Real Estate II, which is targeting $2 billion; and Shorenstein Properties’ Shorenstein Realty Investors Eleven, which is seeking $1.5 billion.
The relatively elevated fundraising volume of recent quarters should maintain course in the coming quarters of 2014 as many economies around the globe continue to make gains, market liquidity continues to improve, and more institutional investors expand their focus and capital allocations to real assets, especially real estate.
