The popularity of value-added funds among European investors has declined 26 percent, according to a report by INREV, the European Association for Investors in Non-listed Real Estate Vehicles.
In its annual investment intentions survey, the importance of value-added vehicles among investors declined at the expense of core funds, with 37 percent of those questioned saying they now favouring the lower risk, lower return-style of property fund. However, the proportion of investors favouring opportunity funds has remained the same compared to the 2008 survey.
“Investors’ preferred style of fund has altered significantly since last year’s survey,” said INREV in a statement. The decline in popularity of value-added vehicles showed a “marked shift” downwards in the risk appetite of some investors. “Some investors remain committed to higher risk/return opportunities taking into account the market conditions,” added the report.
The biggest turnaround since the 2008 survey has been in respondents’ view of blind pool funds. More than two-thirds of the 114 respondents surveyed overwhelmingly preferred blind pools to seeded structures. This is likely due to reluctance by investors to take on properties in a market environment where values are still falling, INREV said.
All groups surveyed show a strong preference for closed-ended fund structures similar to previous surveys. This is probably unsurprising considering the redemption problems encountered by UK and European pooled funds during the latter half of 2007. One third of funds of funds managers favour open-ended funds.
Around nine out of 10 funds of funds manager also said they preferred specialist vehicles compared to general funds – a 25 percent increase compared to 2008.
A preference for specialised funds, single-country funds and a high level of investor involvement may reflect a desire to invest through managers with a track record in their chosen markets as conditions continue to deteriorate.
The survey attracted responses from 30 investors, 13 fund of funds managers and 71 fund managers.