An estimated €17 billion of European assets from 42 closed-ended funds are expected to come to the market in 2015 amid a greater appetite among investors for fund managers to liquidate poorer performing vehicles.
The European Association for Investors in Non-listed Real Estate Vehicles (INREV) provided the figure, having researched 145 closed-ended funds in Europe and a smaller sample of 64 funds due to terminate in the next two years for its INREV Fund Termination Study 2014.
Analyzing the results, it said it noticed a “sharp rise” in the number of funds headed for liquidation, given that investors were “increasingly prepared” to liquidate funds if they failed to reach expected returns. Almost one in two participating funds are expecting to liquidate over the next two years compared to nearly one in three last year. “This means that liquidation has overtaken extension as the preferred method of termination amongst these funds,” INREV explained.
Explaining the findings further, INREV said greater macroeconomic stability may be having an impact on termination strategies. A less turbulent climate was helping more investors make earlier decisions. Another potential explanation was the drop in the proportion of funds citing liquidity as a key consideration.
The association is not arguing that €17 billion of assets coming to the market in 2015 from liquidating funds is a negative trend, however. Henri Vuong, director of research and market information, said: “This may help ease the burden on investors looking for quality assets at a time when demand is increasing due to higher levels of capital raising.”
In last year’s study, Southern Europe represented 52 percent of the assets being liquidated, compared with this year’s study, where the region represents less than 30 percent. In a revealing aside, the study also suggested investors appeared keen to hold on to student housing and leisure assets, which together account for just 4 percent of assets in liquidating funds – a significant drop compared to last year, when it was 11 percent.