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Funds of Funds - World Wide
Anchor investors of the capital fund initiated by the FAP Group Berlin are a renowned German pension fund as well as a large German insurance group.
Non-listed real estate funds of funds doubled their share of total capital raised in 2017, as investors increasingly sought niche strategies and diversification, according to the ANREV / INREV Funds of Funds study released earlier this month.
In total, €152.3bn of fresh equity was raised for non-listed real estate, with €8.1 bn or 5.2% destined for fund of funds. This is a record level of new capital and a significant jump from the €3bn or 2.5% of the total capital that was raised in 2016.
Fund of funds delivered positive returns to their investors, whether broken down by style, structure, regional strategy or size. The results showed that one in seven investors plan to increase their allocations to funds of funds over the coming two years. The sector achieved an annual return of 5.1% over 2017, slightly down on the 6.2% achieved previously.
The study, which includes 60 funds of funds managed by 25 managers, showed that one in seven investors plan to increase their allocations to funds of funds over the coming two years.
Funds of funds with a global strategy comprise the largest share of vehicles in the universe surveyed, both by number and size. Global strategy vehicles make up just under 50% of the overall vehicles and represent 78.6% of total NAV.
Vehicles with a European strategy followed next, representing 33%, whilst those targeting Asia Pacific represent 20%. Strategies targeting North America were minimal.
All regional strategies delivered positive returns, but those targeting Asia Pacific especially so. After a few years of subdued performance, Asia-Pacific funds of funds posted a remarkable comeback with returns of 15.1% in 2017, a strong come back from the -3.3% recorded in 2016. In comparison, European and global funds generated 6.6% and 4.4% respectively, performance similar to last year.
As to investor confidence, while the funds of funds universe is almost evenly split across the three main investment styles, core, value added and opportunity; nonetheless, core funds are much larger in size than the other two, in fact making up just over four fifths, 83.1%, of total NAV. They also invest on average in 20 vehicles and 16 managers which is double the number for value added and opportunity funds of funds.
According to Lonneke Löwik, INREV's CEO, 'The results demonstrate that funds of funds remain in good health. For smaller investors in particular, they offer significant diversification options, and the opportunity to create a nice blend of different aspects.'
'It’s no surprise to see the positive figures from INREV as funds of funds continue to be an excellent tool for investors. They are a great way to achieve exposure to best-in-class fund managers or niche strategies, while simultaneously reducing risk due to significant diversification across sectors and regions,' added Dimme Lucassen, senior investments manager, Aberdeen Standard Investments.
