Property funds audience reveal biggest challenges, and intentions for next 12 months
A recent PFA Learning Series polled professionals working in or with the unlisted funds management community on some key issues facing the sector. The event, on Raising and Deploying Capital During a Pandemic, took place in December 2021. Here are some key findings:
PFA Learning Series participants were asked: What have been the TWO greatest challenges for you or your clients in acquiring property during the pandemic?
• ‘Sourcing property/property pricing’ attracted the most votes, at 54% of respondents;
• ‘Uncertainty caused by the pandemic’ drew 21%;
• ‘Conducting due diligence’ had 17% of the vote;
• ‘Obtaining equity’ and ‘obtaining debt’ were ranked much lower, at 4% each
Looking ahead to 2022, participants were asked: How are you and your clients thinking about launching new unlisted funds in the next 12 months?
• Responses signalled a positive intention to launch new unlisted funds, with 48% voting they ‘Positively – definitely will’;
• 43% responded ‘Neutral with a positive bias’.
The intentions to launch a fund might be strong, but participants were also asked: What are the biggest hurdles for you in launching a new fund?
• ‘Asset values and competition’ were clearly the biggest hurdle, attracting 79% of votes.
• ‘Balance sheet support’ was the next most significant, attracting 11% of votes.
When considering the appeal of unlisted property funds, participants were asked: What is the illiquidity risk premium your investors expect to earn from investing in unlisted direct commercial property?
The vast majority of respondents picked a risk premium of at least one per cent, while 71 per cent responded that a risk premium would be two per cent or more. 24 per cent of respondents chose a risk premium at greater than 3 per cent.
Zero respondents thought there would be no difference in the risk premium expected by investors.
Image: Australian Unity