Franklin joins fund of funds party

As property investors look to diversify across the Continent, Franklin Templeton closes its inaugural European fund of funds vehicle.

Franklin Templeton Real Estate Advisors, the property arm of the US investment management firm Franklin Templeton, has raised $273 million (€210 million) for its inaugural fund of funds vehicle focused on European real estate.

The fund, Franklin Templeton European Real Estate Fund of Funds, will invest exclusively in private real estate funds across Europe and is being run by managing directors Raymond Jacobs and Marc Weidner.

More than 40 percent of the fund has already been committed to five investments, according to a statement released by the firm. Investors include institutions from Finland, Germany, Switzerland and the UK.

“European investors are now demanding investment quality as well [as] broad pan-European exposure— not just domestic property as was the case historically,” Jacobs said in a statement.

Fund of funds are becoming a growing part of the private equity real estate landscape, particularly in Europe and Asia, as institutional investors look to diversify their property holdings to new markets.

Last year, Richard Ellis and Aberdeen Property Investors each closed a European fund of funds vehicle on €150 million and €624 million, respectively. In July, Composition Capital Partners closed on a combined $350 million for two separate fund of funds focused on Europe and Asia. And earlier this year, Sparinvest Property Advisors raised $640 million for a global real estate fund of funds. In November, both ING Real Estate and BlackRock revealed plans for a European fund of funds that may reach €1 billion.

Ville Raitio, research director at INREV, recently told The Financial Times that there are 11 fund of funds focused on Europe with gross assets of €5.2 billion. Raitio added that more are on the way as another 11 vehicles are in the pipeline.

Fund of funds have also been launched recently to focus on the global real estate market. Goldman Sachs and LaSalle Investment Management are each raising a global vehicle targeting $1 billion. Other large real estate investors are examining plans for the same product.

Franklin Templeton Real Estate Advisors, led by Jack Foster, currently has approximately $2.5 billion committed in international real estate funds.