PREA 2009: Fewer commingled funds in future

More than half of all delegates at the PREA spring conference in Washington DC believe LPs will call for more separate accounts and fewer commingled funds. However, opportunistic strategies make the most sense in 2009.

There will be fewer commingled private equity real estate funds in the future in the wake of the credit crisis, according to delegates at the PREA spring conference.

A survey of professionals attending the Washington DC event revealed that 55 percent believed there would be fewer commingled property funds in the future and a greater call for separate accounts.

LPs are increasingly calling for greater transparency and control over investments, according to sources. “This is something that is being talked about more and more often,” said one private equity real estate veteran attending the Pension Real Estate Association conference.

The survey was conducted at the close of the second day of the PREA conference, with two-thirds of those questioned equally split between GPs and LPs.

Despite predicting fewer commingled funds in the future though, a third of delegates said opportunistic private equity real estate strategies made “most sense” for 2009. A further 26 percent believed core strategies would be the most appropriate, with just 12 percent  backing value-added strategies.

However, a further 30 percent warned neither opportunistic, value-added or core strategies made the most sense in 2009 as they “waited for the dust to settle”.

During the poll, 51 percent of delegates also said the availability of debt upon loan maturity was the biggest risk facing private equity real estate firms today. Debt roll-overs are the most important risk factor for the entire real estate industry in 2009 and beyond, according to 45 percent of those questioned.