12 May 2017
London
Reporter: Theo Andrew

Investors cautious over emerging fund managers


Emerging private real estate managers have closed fewer funds every year since 2012 as institutional investors target established managers, according to new research from Preqin.

First or second-time fund managers closed 72 funds last year raising $11 billion, down from the 100 closed in 2015, which raised $16 billion.

Emerging managers accounted for 27 percent of all funds closed in 2016, but only 10 percent of all capital raised.

This is compared to the closing of 34 percent of funds in 2015, raising 15 percent of market capital and 2011, a bumper year for emerging mangers, which closed almost half the funds, raising 41 percent of market capital.

The uncertainty of a lack of a track record deters investors from allocating capital to emerging firms, according to Andrew Moylan, head of real estate products at Preqin.

According to Preqin, 36 percent of investors would commit funds run by emerging managers, compared to 72 percent in 2009.

The average fund size of established managers in 2016 dwarfed emerging managers, $568 million to $154 million respectively.

Emerging managers are not being deterred as 207 emerging vehicles are in action, targeting $39 billion of capital, up from 167 funds seeking $31 billion this time last year.

Moylan said: “Many institutional investors are looking to reduce their roster of managers, and commit greater levels of capital to the largest, most experienced firms. Consequently, emerging managers have closed fewer funds each year since 2012.”

He added: “However, it is clear that institutions which have the resources to conduct due diligence on newer firms have the potential to be rewarded, with emerging managers frequently outperforming their more experienced counterparts.”

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