GLOBAL 鈥� Real estate investors are switching from core to better-performing value-added funds amid continuing concerns over core pricing, according to a new report.
Preqin, which measured investor intentions for the next 12 months, found appetite for core property funds had fallen from 54% in January 2011 to 45% in January this year. Appetite for value-added strategies increased from 46% to 55% over the same period.
Real estate data manager Andrew Moylan attributed the shift to continuing concerns over core pricing and the recent strong performance of value-added funds launched between 2008 and 2009.
However, he reaffirmed a longer-term trend towards investors concentrating on fewer manager relationships, despite an increase in the share of capital raised by value-added funds from 13% in 2011 to 18% last year.
鈥淪ome value-added funds will be successful but there are still many fund managers chasing limited capital,鈥� he said.
The number of value-added funds rose from 95 to 107 over the past year, although Moylan said there was no evidence that investors were targeting any specific type of value-added fund according to geography or asset class.
Institutions planning to invest in value-added funds include German insurer Barmenia, which will commit 鈧�40m primarily to logistics, and the US YMCA Retirement Fund, which will commit $100m (鈧�76.8m) to five value-added funds across North America, Europe and Asia.
Although appetite for core-plus funds has increased from 27% in January 2011 to 45% in January 2013, Moylan pointed out that value-added funds tended to be more widely targeted, although some funds have incorporated elements of both strategies.
The findings are consistent with those of , which found that the proportion of investors interested in value-added strategies had doubled in 12 months.
Investors鈥� increased willingness to commit capital to value-added funds appears to have transpired as part of a broader shift up the risk curve. Initial data released this week from CBRE鈥檚 annual investor intentions survey confirmed increased interest in opportunistic and value-added assets, with more than 40% of 362 investors identifying them as the most attractive acquisition targets, compared with 53% which opted for core assets.
