Secondary trading activity in European property funds is set to rise over the coming months as investors rebalance their portfolios, according to INREV.
More than €1.1bn of secondary trades – where an investor sells a stake in a non-listed fund to another – were transacted over the last 12 months, according to an INREV report released today.
The rise of the secondary market has resulted from an increase in the number of investors forced to exit property funds at considerable discounts because they need to raise liquidity. INREV said today that there were another €230m of such trades in the pipeline.
Over the last few months, investors have been gearing up to take advantage of this upturn in secondary trades. Connecticut-based firm Landmark Partners is raising capital for a $750m vehicle to target the market.
ING Real Estate Select is also seeking to tap into the market. Last year, its managing director for Asia Pacific, Nicholas Wong, said the secondary market would be one of the ‘biggest opportunities’ of 2009.
Speaking at the INREV seminar at MIPIM, Mike Clarke, head of property distributions at Schroders and chairman of INREV’s secondary markets committee, said: ‘We have seen institutional investors in the UK and Germany exercising redemptions in the UK and there is more likelihood of investors considering secondary trading as they look to rebalance their portfolios in changing market conditions.'
INREV’s Liquidity Provisions Study also predicted that opportunistic funds were the style of vehicle that would see most secondary trading – 70% of respondents expected an increase in investors trading out of these funds as they look to change allocations because of lower than anticipated returns.