Debt fund market share strengthens

The number of real estate debt funds, as well as the amount of capital they are raising, took a significant jump in 2017, and they continue to capture a growing share of investor capital in the fundraising market, according to Institutional Real Estate FundTracker.

Debt-only funds closing in 2016 accounted for 20 percent of the total capital raised. By 2017, that market share had jumped to 31 percent. In 2015, this number stood at just 14 percent.

According to FundTracker, 509 real estate investment funds have held a final closing since Jan. 1, 2015. Of those, 80 funds (16 percent) were focused exclusively on debt. This three-year rolling average has remained relatively stable, with the previous debt-only market share average beginning in 2014 and ending in 2017 accounting for 15 percent of the total.

During our most recent three-year period, an additional 54 funds combined debt and equity in their mandates. All together, funds with a debt component total 26 percent of the funds closed in the past three-and-a-half years.

Year-to-date in 2018, 21 percent of the funds closed have been debt-only, while an additional 6 percent have a debt-plus-equity mandate. This is down from 2016, when 13 percent of funds reaching their fundraising goals were debt-only, with another 9 percent combining equity with debt.

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