$23bn of opportunistic funds have been put on hold

With LPs struggling to balance declining distributions against pending capital calls, a report by Clerestory Capital shows 32 fund managers in market over the past six months chose to stop or put fundraising efforts on hold. Among the worst hit were funds targeting India and China.

GPs trying to raise $23 billion in opportunistic real estate funds over the past six months stopped or put their fundraising efforts on hold because of a dearth of LP commitments, research by Clerestory Capital has revealed.

Since October last year, 32 opportunity funds opted to halt their fundraising activities or put their vehicles on hold until market conditions improved.

A study of small and large cap opportunistic funds by the New York-based funds of funds manager showed that of the 32 funds that stopped or paused fundraising, 11 were targeting India and 2 were focused on China. Of the 32 funds, 26 were small cap funds, targeting less than $1 billion, and 6 were large cap vehicles, trying to raise more than $1 billion in equity commitments.

Among the reasons cited for delaying fundraising was the fact that some GPs are focused on managing legacy assets within their portfolios. As a result, some LPs told Clerestory they wanted to keep uncommitted capital on the sidelines for existing investments that may need equity support.

Tommy Brown, Clerestory principal and co-founder, said: “Opportunistic fund managers are having to downsize, delay, or, in some cases, withdraw their product offerings, as investors seem to be keeping their powder dry to support their existing fund investments with equity if it’s needed.”

Overall, Clerestory identified 121 funds currently in market trying to raise $100 billion in private equity real estate capital. Since October last year, 28 new funds have been launched – many of which are first and second-time funds seeking to raise as much as $14 billion. Most new funds are targeting distressed investment opportunities in the US and Western Europe.

During the past six months, Clerestory said 31 opportunistic vehicles held final closes raising $18.5 billion in equity. Most had stopped fundraising at the time of Lehman Brothers’ bankruptcy.

Joanne Douvas, Clerestory principal and co-founder, added: “Now is the time for investors to spend time getting to know managers with interesting funds and strategies in the market, so they will be poised to take advantage of the colossal buying opportunity coming later this year and through 2010 and 2011.”