However, fund raising in the sector looks set to become more challenging over the coming years as more firms than ever are hitting the fund raising trail to take advantage of potential stellar returns in the sector which have averaged between 16% and 26% since 2000, exceeding the Private Equity Intelligence average by between 5% and 14% per annum.
For this reason, more LPs continue to make their first forays into private equity real estate funds, while existing investors are increasing their allocations. The average allocation to real estate among existing investors now stands at 4.6%. The current average target allocation is 5.7%, demonstrating that there is still a huge amount of potential capital available to managers of new funds.
But although firms are raising more capital, there are now more funds on the road than ever with 206 funds currently seeking an aggregate US$105bn. This is three times the value of funds being raised as recently as January 2007 and a massive six times increase from January 2006. With this much competition in the market, firms will have to sharpen their focus in order to ensure a successful fund raising for their latest vehicle.