Investors increasingly are looking to make larger allocations to private equity real estate in 2011, with a four-fold increase in those LPs deploying between $250 million and $1 billion this year.
A survey of pensions, family offices, fund of funds managers, consultants and advisors by placement agent Probitas Partners revealed that up to 12 percent were looking to invest between $250 million and $1 billion during the course of the year – up from no more than 3 percent in 2010. Around 6 percent of LPs said they were looking to invest between $500 million and $1 billion in 2011, up from 2 percent last year, while those looking to invest more than $1 billion over the course of the year increased to 6 percent in 2011 from 5 percent 12 months prior.
Probitas said, however, the push for greater allocations to the private equity real estate asset class wouldn’t automatically translate into larger commitments for commingled vehicles, with 60 percent of endowments and foundations expected to make average investment sizes of less than $10 million in 2011. Across all investors, a third of LPs said the average commitment size would be between $10 million and $25 million, while a further 24 percent revealed the average size would be between $25 million and $50 million.
Tracking more than 330 funds in market, seeking more than $130 billion of equity, Probitas said “for the large number of fund managers that delayed fundraising in 2009 and 2010 and plan to return to market this year, securing commitments from institutional investors will likely be a challenge”.
Track record, the firm added, remained a critical factor for LPs when determining new fund investments, with 55 percent of investors agreeing the “pursuit of fund manager with the best track records available in the market” was the key investment driver. That was followed with 51 percent of investors saying they were focused on maintaining established relationships with fund managers returning to market this year. And when it came to new fund managers raising a fund, track record again was the key characteristic 68 percent of LPs were looking for.
Probitas’ annual investor survey was conducted at the end of December, with endowments and foundations making up a quarter of all respondents.