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Preqin: investors displaying mix of increased caution and evidence they are nearing target allocation fulfilment

Investors are either demonstrating a cautious approach to minimise risk in the face of a potentially imminent market correction, or they are nearing the fulfilment of their target allocations, Preqin suggests. Additionally, the proportion committing $50-99 million is down six percentage points, and the proportion targeting commitments of $100-299 million has halved.

In its Q3 2019 Real Estate update, Preqin explains:

“Low-risk strategies have attracted increased interest in Q3 2019, with 16% more investors targeting core than a year ago, and 17% more targeting core-plus. Appetite for riskier strategies has dropped in contrast, with the share of investors targeting value-added funds decreasing by 14% and opportunistic by 9%.

“Investors appear to have shifted their focus somewhat away from North America, Asia-Pacific and emerging markets in favour of investment in Europe and Rest of World, which are the only regions to have recorded an uptick in interest as compared with Q3 2018.”

Preqin data for Q3 also showed:

  • After a slow start to the year, swathes of new private real estate funds have formed and been brought to market in the second half of 2019:
    • As of October, there are 856 funds in market globally, seeking a combined $251 billion from investors.
    • The majority (61%) of funds in market are targeting value-added and opportunistic strategies, where 60% ($150 billion) of targeted capital is headed.
  • Debt and core strategies also make up significant proportions of funds in market, targeting $35 billion and $25 billion, respectively.
  • More than half (52%) of funds in market have already held an interim close, securing a combined $81 billion – 32% of the total amount targeted.

james.wallace@realassetmedia.com