Around one in five real estate funds that held final closes in the second half of 2009 were targeting less than $1 billion of equity, according to research by funds of funds Clerestory Capital Partners.
The New York-based firm revealed out of 26 opportunistic property vehicles to have held final closes in the six months to the end of 2009, 20 were “small cap” funds targeting less than $1 billion. Overall, just $17 billion of equity was raised by funds in the last six months of 2009, with the small cap vehicles raising $8.1 billion and the six larger funds raising $9.1 billion.
Joanne Douvas, co-founder and managing principal, said the figures showed a “clear trend” towards smaller Joanne Douvas, co-founder and managing principal, Clerestory Capital Partners
fundraising efforts, with larger funds “proving too daunting in this investment environment”. The $17 billion of equity raised, though, was more a “clearing of the gridlock than a real surge in new money from investors”, Douvas said, adding: “Many of these funds began raising capital before the pivotal point in the credit crisis with the collapse of Lehman Brothers in September 2008, and only after exhaustive marketing periods have they now closed.” 
Many of these funds began raising capital before the pivotal point in the credit crisis with the collapse of Lehman Brothers in September 2008, and only after exhaustive marketing periods have they now closed.
Fellow Clerestory co-founder and managing principal Tommy Brown added the lack of deal flow in many property markets was preventing many GPs from deploying capital once they had secured it. But he noted “capital raising [would] scale-up to the opportunities available once they present themselves”.
Clerestory’s survey of opportunistic funds in market, conducted in January and February this year, also revealed 14 new smaller funds came to market in the second half of 2009, targeting up to $5.3 billion in capital. One fund was eyeing $1 billion in equity. The funds included nine focused on strategies in the Americas, four in Asia and two in Europe, the firm said.
According to PERE data, value-added and opportunistic real estate funds closed on $30.4 billion of equity in 2009, including first and final closes. That compared to $73.1 billion in 2008 and $85.2 billion in 2007.
Last year, Europe-focused funds suffered the smallest decline in fundraising securing 61 percent of the commitments similar funds achieved in 2008. In the Americas that figure was 40 percent compared to 39 percent for global strategies and 21 percent for Asia-focused funds.
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