Earlier this month, Stockholm-based Aberdeen Property Investors closed Aberdeen Indirect Property Partners (AIPP) on €623.5 million ($740 million), the firm's first private equity real estate fund of funds—and the first vehicle dedicated to the pan-European market.
Funds of funds have not been as popular in private equity real estate as they have been in traditional private equity—the first true US fund was launched in 2002. This has been even more true in Europe, where limited partners have traditionally made direct investments in their home markets. But European institutions are beginning to awake to the possibility of private equity real estate funds as a way to diversify their real estate portfolio.
Anders Anstrom, managing director of the Aberdeen subsidiary managing AIPP, points out that his investors include Dutch and Scandinavian institutions, who have traditionally been more open to investing abroad, as well as Portugese and Swiss institutions, who have not.
Though Aberdeen may be the first— it held its first close in February 2005—it is certainly not the only player. PREFF, a fund of funds managed by Portgul's Atrium Investimentos, held a first close in May of last year. In November, international money manager Franklin Templeton Investment raised €60 million in a first close of its European private equity real estate fund; it is looking to raise a total of €300 million. And several other institutions are on the fundraising trail, including Composition Capital and Henderson Global Investors.
“A lot of people have ambitions to launch fund of funds,” says Anstrom. “I know up to 15 or 20 people who have said they'd like to do it, but thus far, very few people have raised capital.”
Nevertheless, that could change soon. The number of US private equity real estate firms with dedicated European vehicles—and looking for European capital—are increasing, as are the number of home-grown vehicles. Much like the private equity industry of ten to 15 years ago, fund of funds provide a logical entry point for European institutions.
“We have a number of US fund managers [in our portfolio],” says Astrom. “The Carlyles of the world have good teams and track records. We are definitely looking at them.”
These days, it seems, so are many others.