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Real Estate Spotlight - April 2012

Apr 04, 2012
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Real Estate Spotlight is the monthly newsletter published by Preqin packed full of vital information and data, all based on our latest research into the private equity real estate industry. Real Estate Spotlight combines information from our online products Real Estate Online and Real Estate Capital Sources.

Real Estate Spotlight
April 2012
Sovereign Wealth Funds Investing in Real Estate With the number and aggregate assets of sovereign wealth funds continuing to grow, this month's feature article takes an in-depth look at these important investors and their real estate investment preferences. Page 2

April 2012 Volume 6 - Issue 4

Latin America-Focused Fund Managers A look at the fund managers currently focusing on Latin America.

FEATURED PUBLICATION: The 2012 Preqin Sovereign Wealth Fund Review
The 2012 Preqin Sovereign Wealth Fund Review

Page 5 US Public Pension Plans Which US public pension plans are investing in private real estate, and what are their investment preferences? Find out in Investor Spotlight. Page 6 Fundraising

ISBN: 978-1-907012-55-6

The 2012

Preqin Sovereign Wealth Fund Review

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The latest facts and figures from the private real estate fundraising market.
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Page 7 Past Investments A look at how commitment sizes vary by vintage year and investor location. Page 9 Industry News Find out which investors are planning to commit to new funds in the next 12 months, and which two public pension plans have just committed to Blackstone Real Estate Partners VII. Page 11 Conferences A look at the forthcoming industry conferences around the world. Page 12

You can download all the data in this month's Spotlight in Excel. Wherever you see this symbol, the data is available for free download on Excel. Just click on the symbol and your download will begin automatically. You are welcome to use the data in any presentations you are preparing, please cite Preqin as the source.

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Feature

Sovereign Wealth Funds Investing in Real Estate

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Sovereign Wealth Funds Investing in Real Estate
With the number and aggregate assets of sovereign wealth funds continuing to grow, Sarah Unsworth takes an in-depth look at these important investors and their real estate investment preferences. Fig. 1: Aggregate Sovereign Wealth Funds Assets under Management
5

Fig. 2: Proportion of Sovereign Wealth Funds Investing in Real Estate by Total Assets
90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Less than $1bn $1-9bn $10-49bn $50-99bn $100-249bn $250bn or More 25% 36% 68% 50% 50%

Aggregate SWF Assets under Management ($tn)

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2008 2009 2010 3.05 3.22 3.59

3.98

2011

2012

Source: Preqin

Despite ongoing economic uncertainty and the continuing impact of the sovereign debt crisis, we have not seen a return to the widespread withdrawals from sovereign wealth funds that occurred in the aftermath of the global financial crisis, and the aggregate total assets of all sovereign wealth funds worldwide has continued to increase apace. SWF total assets under management have increased by nearly 15% since 2011, and now stand at $4.62tn. Despite this, there remains the possibility that some institutions will be required to cover the fiscal shortfalls of governments in the future. In previous editions of The Preqin Sovereign Wealth Fund Review, we correctly predicted that following a degree of global recovery, sovereign wealth funds would resume their portfolio diversification plans. As anticipated, this led to an increase in the proportion of institutions investing in alternative assets between 2009 and 2011. In 2012, however, there are indications that this process has slowed, with older institutions either having already completed their return and newer institutions still in the early stages of considering their strategic allocations. That said, the overall levels of capital flowing into alternatives from sovereign wealth funds remain extremely significant. Total assets held by sovereign wealth funds have increased significantly over the last year, and this in turn has led to growing levels of capital feeding allocations to the various asset classes. As new sovereign wealth funds are launched and existing formation plans come to fruition, such as in respect to Ghana and Iran's new funds, it is clear that this group of investors will remain an important potential source of capital for investment managers worldwide. SWFs tend to have longer-term investment horizons than other types of investors. Unlike pension funds or insurance companies, for example, many SWFs do not have specific liabilities to meet and as such they are more able to invest significant amounts of their portfolios in longer-term and

2

Proportion of SWF RE Investors

4.62

83%

Source: Preqin

alternative investments. SWFs represent a significant proportion of investors in the real estate asset class. Fifty-three percent of SWFs are known to invest in real estate, and a further 6% are considering investing in the asset class.

Proportion of Sovereign Wealth Funds Investing in Real Estate by Total Assets
Larger sovereign wealth funds are more likely to invest in real estate. As shown in Fig. 2, 83% of sovereign wealth funds with more than $250bn in total assets and 50% of SWFs with total assets of $50249bn invest in real estate, whereas only 25% of SWFs with less than $1bn in total assets invest in the asset class.

Method of Real Estate Investment
Sixty-two percent of sovereign wealth funds invest both directly and indirectly in real estate. Twenty-six percent of sovereign wealth funds only invest in real estate directly, while 12% only invest indirectly. Fig. 3 shows the proportion of sovereign wealth funds investing in real estate that gain exposure through direct investments, through private real estate funds or through listed real estate. A large proportion (85%) of sovereign wealth funds invest in real estate directly. Kuwait Investment Authority is one SWF that invests directly in the asset class. The $296bn SWF invests directly in real estate both in domestic and international markets. It also commits to private real estate funds and to listed real estate. Hong Kong Monetary Authority (HKMA) is another sovereign wealth fund that invests directly. Its real estate exposure comes via its wholly owned subsidiary, Real Gate Investment Company (RGIC). Through RGIC, HKMA has indirect stakes of 74% and 51% in two real estate joint venture companies respectively.

2012 Preqin Ltd. www.preqin.com

Feature

Sovereign Wealth Funds Investing in Real Estate

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Fig. 3: Real Estate Investment Preferences of Sovereign Wealth Funds
90% 85%

Fig. 4: Private Real Estate Fund Strategy Preferences of Investing Sovereign Wealth Funds
80% 75% 65% 55% 55% 45% 40%

Proportion of SWF RE Fund Investors

Proportion of SWF RE Investors

70% 60% 50% 40% 30% 20% 10%
Opportunistic

80% 70% 60% 50% 40% 30% 20% 10% 0% Direct Private Funds Listed 35% 59%

10%

10%

Value Added

Method of Investment in RE Source: Preqin

Fifty-nine percent of sovereign wealth funds invest in private real estate funds. New Mexico State Investment Council invests in private real estate funds and aims to create a diversified portfolio with respect to region, strategy and property type. The sovereign wealth fund also invests directly in the asset class and its real estate allocation is split equally between direct investments and private real estate fund investments. Listed real estate is less popular with sovereign wealth funds, with 35% including listed real estate investments as part of their real estate allocations.

Private Real Estate Fund Strategy Preferences
Opportunistic and value added are the strategies most favoured by the sovereign wealth funds that invest in private real estate funds (Fig. 4). New Zealand Superannuation Fund is one sovereign wealth fund that has committed to a number of value added and opportunistic real estate funds. It has a commitment to Willis Bond Capital Partners, a value added fund that invests in mixed use, residential, commercial, office, retail and industrial assets in New Zealand. Gateway Capital Real Estate Fund III is an opportunistic real estate fund that New Zealand Superannuation Fund has committed to. The fund targets opportunities in the Greater China region. While opportunistic and value added funds are relatively high risk, 55% of sovereign wealth funds that invest in private funds also have a preference for core funds. Lower risk/return profile core funds became increasingly popular with all types of investors following the financial crisis and sovereign wealth funds are no different. Debt and distressed strategy funds are favoured by 55% and 45% of SWFs respectively, while 40% have a preference for core-plus vehicles. Real estate funds of funds and secondaries funds are the least popular strategies among sovereign wealth funds that invest in private real estate funds, with just 10% of this type of investor expressing a preference for investing in such vehicles.

has recently made several commitments to real estate. It committed $75mn to TA Realty Associates X and $50mn to OCM Real Estate Opportunities Fund V in 2011, and in January 2012 it committed $50mn to Prudential Senior Housing Partners IV. Alberta Heritage Savings Trust Fund intends to continue investing directly in real estate during 2012. Temasek Holdings is optimistic about opportunities created by the needs of growing middle income populations in Asia and other markets, and intends to remain active in the real estate market. That said, while many sovereign wealth funds are likely to remain active in the real estate asset class, the real estate portfolios of many sovereign wealth funds were negatively affected by the financial crisis and some remain cautious about investing in the coming year. A number of new sovereign wealth funds were launched last year and, as these new funds mature, they are likely to diversify into alternative assets, such as real estate. The diversification and potential for attractive returns offered by real estate investments means that the asset class is likely to remain an attractive option to investors, and to sovereign wealth funds in particular.

Data Source:
The 2012 Preqin Sovereign Wealth Fund Review provides detailed analysis of sovereign wealth funds and their activity across all asset classes. It contains vital analysis plus full profiles for all 63 sovereign wealth funds worldwide. For more information, sample pages and to order a copy of the Review visit: www.preqin.com/swf

Outlook
Although the real estate asset class has experienced difficulties over the past few years, a significant proportion of sovereign wealth funds still invest in the asset class, and many will make new commitments in 2012. Texas Permanent School Fund State Board of Education

3

2012 Preqin Ltd. www.preqin.com

Secondaries

Core-Plus

Core

Debt

Distressed

Fund of Funds

0%

2012 Preqin Global Alternatives Reports

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The 2012 Preqin Global Alternatives Reports are the most comprehensive reviews of the alternatives investment industry ever undertaken, and are a must have for anyone seeking to understand the latest developments in the private equity, real estate and infrastructure markets.
Key content includes: Interviews and articles from the most important people in the industry today; Detailed analysis on every aspect of the industry with a review of 2011, and predictions for the coming year; Comprehensive source of stats - including fundraising, performance, deals, GPs, secondaries,fundterms,investors,placementagents,advisors,lawfirms; Numerous reference guides for different aspects of the industry - Who is the biggest? Where are the centres of activity? How much has been raised? Where is the capital going? Who is investing? What are the biggest deals? What is the outlook for the industry?
ISBN: 978-1-907012-17-4 $175 / 95 / 115 www.preqin.com

2012 Preqin Global Infrastructure Report

2012 Preqin Global Private Equity Report

2012 Preqin Global Real Estate Report

alternative assets. intelligent data.

$175 / 95 / 115 www.preqin.com
alternative assets. intelligent data.

$175 / 95 / 115 www.preqin.com
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For more information visit: www.preqin.com/reports
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Fund Managers

Latin America-Focused Managers

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Latin America-Focused Managers
Jonathan Ma provides the lowdown on real estate fund managers targeting Latin America. Fig. 2: Property Type Focus of Latin America-Focused Funds on the Road
47 16.6 14 3.6
10 9 8 7 6 5 4 3 2 1 0 Diversified 2.6 1.0 Aggregate Target ($bn) 5 No. Funds Raising 9

Fig. 1: Key Facts - Latin America-Focused Funds
Number of Latin America-Focused Funds Closed 2003 - 2012 Aggregate Capital Raised ($bn) Number of Funds Raising Aggregate Capital Targeted ($bn)

Data Source:
Preqin's Real Estate Online currently has detailed profiles for 92 real estate firms which invest in Latin America. Subscribers can click here to see the full list. Not yet a subscriber? To see how Real Estate Online can help you, please visit www.preqin.com/reo

Sector-Focused

Source: Preqin

Fig. 3: Primary Location Focus of Latin America-Focused Funds on the Road
7 6 5 4 3 2 1 0 2.0 1 0.5 Mexico 0.3 Peru 1 0.1 Colombia 3 3 6

Fig. 4: Annual Latin America-Focused Closed-End Private Real Estate Fundraising, 2006 - March 2012
9 8 7 8 7 6 5 3.6 2.2 2.5 1.8 0.9 1 0.8 2011 Jan Mar 2012 4 3.0 Aggregate Commitments ($bn) 6 No. Funds Raised

No. Funds Raising

6 5 4 3

Aggregate Target ($bn)

2 1 0

0.7

2006

2007

2008

2009

2010

Brazil

Source: Preqin

Latin America

Year of Final Close Source: Preqin

Fig. 5: Largest Latin America-Focused Funds on the Road
Fund Hemisferio Sul Investimentos Fund IV SDI Brazil FIP Paladin Realty Latin America Investors IV Artha LD Fund PLA Industrial IV Manager Hemisferio Sul Investimentos SDI Desenvolvimento Imobilirio Paladin Realty Partners Artha Capital Pramerica Real Estate Investors Strategy Value Added Opportunistic Opportunistic Value Added Opportunistic Target Size (mn) 650 USD 450 USD 400 USD 350 USD 350 USD Location Focus Brazil Brazil Latin America Mexico Brazil
Source: Preqin

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Investors

US Public Pension Funds

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US Public Pension Funds
Farhaz Miah takes a look at public pension funds in the US. Fig.1: Key Facts
Average Allocation to Real Estate (% of AUM) Average Target Allocation to Real Estate (% of AUM) 6.3 8
Source: Preqin
7% 57% 11%

Fig. 2: Breakdown of US-Based Public Pension Funds that Invest in Real Estate by Assets under Management
3% 2% Less than $1bn $1-4.99bn $5-9.99bn $10-49.99bn $50-99.99bn $100bn+

Subscriber Quicklink
Would you like to see details of 361 US Public Pension Funds investing in real estate, with information on their areas of interest, key contacts , future plans and more? Click here to view the full list. Not yet a subscriber? To see how Real Estate Online can help you, please visit www.preqin.com/reo

21%

Source: Preqin

Fig. 3: Breakdown of US-Based Public Pension Funds that Invest in Real Estate by Overall Real Estate Allocation
4% $0-99mn

Fig. 4: Fund Strategy Preferences of US-Based Public Pension Funds that Invest in Private Real Estate Funds
90% 81% 64% 48% 38% 35% 30% 15% 8%
Secondaries

Proportion of Investors

9% 7%

8%

80% 70% 60% 50% 40% 30% 20% 10% 0%

$100-249mn 57% $250-499mn $500-999mn $1-4.99bn $5bn+

16%

Source: Preqin

Source: Preqin

Fund Type

Fig. 5: Investment Preferences of US-Based Public Pension Funds that Invest in Real Estate
100% 90% 80% 1% 1% 5% 2% 2% 1% Considering Investing 57% 74% 93% No Longer Investing Do Not Invest

Proportion of Investors

70% 60% 50% 40% 30% 20% 10% 0% Private Funds 24%

40%

Invest

Direct

Listed

Source: Preqin

6

2012 Preqin Ltd. www.preqin.com

Fund of Funds

Opportunistic

Core-Plus

Value Added

Distressed

Core

Debt

Investors

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Investor Commitments
Andrew Moylan looks at how commitment sizes vary by vintage year and investor location, as well as taking a closer look at Preqin's powerful Search by Past Investments tool. Fig. 1: Breakdown of Investor Commitments to Private Real Estate Funds by Size, 2004 - 2012
35% 32% 28% 26% 29% 28% 27% Fund Vintage 2004-2006 Fund Vintage 2007-2009 15% 14% 14% 10% 8% 4% Fund Vintage 2010-2012

Fig. 2: Breakdown of Real Estate Fund Commitments by Investor Location, Vintage Year Funds 2007 - 2012
45% 43%

Proportion of Commitments

30% 25% 20% 15% 10% 5% 0%

Proportion of Commitments

40% 35% 30% 25% 20% 15% 10% 5% 0% $0-19mn $20-49mn $50-99mn 4% 26% 29% 28% 22% 21% 16% 8% 3% $200mn+ Europe-Based Investors North AmericaBased Investors

24% 21% 21%

$0-19mn

$20-49mn

$50-99mn

$100-199mn

$200mn+

$100-200mn

Commitment Size Source: Preqin

Source: Preqin

Commitment Size

Search by Past Investments
Preqin's Online Services include details of over 60,000 known institutional investor commitments to private equity funds, including 8500 known commitments to private real estate funds. Preqin's powerful Search by Past Investments tool allows you to search for investors based on the funds they have invested in previously. You can find investors based on the strategy, geographic focus, manager location, property focus, size and vintage year of the funds in their portfolio. The Search By Past Investments feature is available to all Real Estate Online users. For more information and to arrange a demo, please visit: www.preqin.com/reo

Fig. 3: Breakdown of Investors with Known Commitments to Vintage 2009 - 2012 Funds by Investor Location

Fig. 4: Breakdown of Investors with Known Commitments to Vintage 2009 - 2012 Funds by Type
Public Pension Fund

9%
4% 5% 6% 8%

16%

Foundation 36% Private Sector Pension Fund Endowment Plan Insurance Company

28% 63%

North America Europe Asia and Rest of World

10%

15%

Real Estate Fund of Funds Manager Asset Manager Other

Source: Preqin

Source: Preqin

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2012 Preqin Ltd. www.preqin.com

2011 Preqin Private Real Estate Investor Review

alternative assets. intelligent data.

Featuring profiles for over 1,500 of the most important investors in private equity real estate funds worldwide, plus over 60 pages of analysis and league tables, the 2011 Preqin Private Real Estate Investor Review is the most comprehensive printed guide to institutional investors in private equity real estate ever produced. The 2011 review represents a vital resource for all those involved in the marketing of private equity real estate funds, investor relations, investment advisors, and those considering launching a new vehicle in 2011/12.
LP Profiles include the following key information: Direct contact information for key personnel Key financial information Sample investments Fund preferences by type, geography and experience Plans for investments in 2011/12 Over 60 pages of vital analysis are also provided, including: A detailed look at the investor universe including changing allocations, preferences and plans for the next 12 months Key investors to watch in 2011/12 Individual analysis sections for investors in all major countries and regions worldwide Analysis of the current fundraising environment Full listings for every private equity real estate fund currently in market

The 2011

Preqin Private Real Estate Investor Review

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Fundraising

The Latest Fundraising Statistics

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Fundraising
Carla Henry provides a round-up of the latest real estate fundraising statistics. Fig. 1: Closed-End Private Real Estate Funds in Market
No. Funds Raising North America Europe Asia and Rest of World 255 108 92 Aggregate Target Size ($bn) 96.7 40.6 32 Average Target Size ($mn) 393 390 366

Fig. 2: Closed-End Private Real Estate Funds in Market by Target Size
400 350 300 250 200 150 100 65.9 82 47.8 32 55.7 Aggregate Target ($bn) 341 No. Funds Raising

Data Source:
Preqin's Real Estate Online features detailed profiles for all 455 private real estate funds currently in market, including strategy, geographic focus, property focus, target size, anticipated closings and more. www.preqin.com/reo

50 0

Less than $500mn

$500-999mn

$1bn+

Source: Preqin

Fig. 3: Largest Asia-Focused Funds on the Road
Fund Alpha Asia Macro Trends Fund II Manager Alpha Investment Partners Target Size (mn) USD 1,500 Strategy Core-Plus and Value Added Debt Debt, Distressed and Opportunistic Opportunistic Opportunistic Debt, Distressed and Opportunistic Opportunistic Core, Core-Plus and Value Added Property Focus Apartment, Hotels, Logistics, Office, Retail, Warehouse Distribution Any Hospitality, Industrial, Mixed Use, Office, Residential, Retail Office, Residential, Retail RE Companies Any Commercial, Office Industrial, Logistics, Office, Residential, Retail

Fortress Japan Opportunity Fund II Aetos Capital Asia IV

Fortress Investment Group Aetos Capital Asia

JPY 100,000 USD 1,000

ARA Asia Dragon Fund II Forum Asian Realty Income III Secured Capital Real Estate Partners V Rose Rock (Tianjin) RE Investment Fund I SEB Asian Property Fund II

ARA Asset Management Forum Partners Secured Capital Japan Rose Rock Partners SEB Asset Management

USD 1,000 USD 1,000 USD 1,000 CNY 5,000 EUR 600

Fig. 4: Recently Closed Funds
Cornerstone Real Estate Fund VIII Manager Cornerstone Real Estate Advisers Strategy Value Added Target IRR (Net) 12-14% Property Focus Industrial, Multi-Use, Office, Retail Geographic Focus US Final Close USD 546mn (March 2012) Illinois Municipal Retirement Fund, National Sample Investors Pension Service GTIS Brazil Real Estate Fund II Manager GTIS Partners Strategy Opportunistic Property Focus Office, Residential Geographic Focus Brazil Final Close USD 810mn (March 2012) Placement Agents Not Used Sample Investors Michigan Laborers' Pension Fund

9

2012 Preqin Ltd. www.preqin.com

2012 Preqin Alternatives Investment Consultant Review

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A good source of intelligence on the alternatives investment consultant industry is a vital tool in helping fund managers and marketers build relationships with these important custodians of institutional investor capital. The 2012 Preqin Alternatives Investment Consultant Review is the ultimate guide to this important sector within the alternatives sphere, containing profiles for over 350 different investment consultancy firms. Consultant profiles within the Review contain information on the types of services offered, asset classes covered, key financial information, direct contact information for relevant contacts and more.
Key content includes: Vital analysis on all aspects of the alternatives investment consultant universe. Includes key trends plus information on the market's make-up. Listings for over 1,500 investors in alternatives showing which consultancy firms they are advised by in specific asset classes. Specific intelligence on activity in private equity, real estate, hedge funds and infrastructure included in all analysis and profiles. Comprehensive profiles for over 350 investment consultants. Profiles include key individual contact information, areas of speciality, plans for 2012 and beyond, financial information, service coverage etc. See which firms operate a buy-list, which firms consider first-time managers, and what they look for when considering new opportunities. Results of our in-depth survey showing investor satisfaction with their consultants and other key information. League tables.
Th 2012 P

The 2012

i Al i I

Preqin Alternatives Investment Consultant Review

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News

Industry News

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Industry News
The inside scoop from the world of private real estate gathered by Preqin's team of researchers.
Amongst those investors releasing new investment plans in the past month was Weil, Gotshal and Manges Pension Fund. The $500mn private sector pension plan, which currently has an allocation to the asset class of 5% of AUM, is likely to commit between $7mn and $8mn to new real estate funds in the next 12 months. Stark Community Foundation meanwhile is looking to commit $1mn to a real estate fund in the coming year. The $150mn foundation, which prefers to invest with experienced fund managers, is looking for suitable US-focused opportunistic funds. Recent fund commitments have been made by a number of investors. Los Angeles Water and Power Employees' Retirements Plan invested $20mn in Blockstone Real Estate Partners VI, while Texas County and District Retirement System committed $40mn to the same fund. Teachers' Retirement System of Louisiana has approved a commitment of up to $50mn to Walton Street Real Estate Fund VII. News from the Road DLJ Real Estate Capital Partners VI has just hit the road. The fund will focus predominantly on acquiring opportunistic multi-family, retail, office and industrial properties in the US and internationally, with a focus on China and the UK. At the other end of the spectrum, GTIS Brazil Real Estate Fund II has just closed on $810mn, above its original target of $600mn, while ARA Asia Dragon Fund II has held a second close. The fund is targeting a range of property types in Asia, and is targeting $1bn.

Quarterly Opportunistic Private Real Estate Fundraising, Q1 2009 - Q1 2012
35 30 25 21 20 15 10 5 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2009 2010 2011 2012 8.8 9.0 6.2 7.3 19 19 18 11.6 11 9.0 6.6 4.4 4.0 4.2 1.6 18 13 7.9 6 3.1 29 25 21 20 18 No. Funds Raised

Aggregate Commitments ($bn)

Source: Preqin

What's New?
Do you have any news you would like to share with the readers of Spotlight? Perhaps you're about to launch a new fund, have implemented a new investment strategy, or are considering investments beyond your usual geographic focus? Send your updates to cwilson@preqin.com and we will endeavour to publish them in the next issue. All of Preqin's exclusive intelligence is available on Real Estate Online, the industry's leading source of information on private real estate funds, managers and investors in the asset class. Subscribers can view more news and information here:

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Conferences

Forthcoming Events

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Conferences Spotlight
Conference AIFM Directive Level 2 Implementation Measures APREA Property Leaders Forum Real Estate Investors Summit: Dealmakers Conference Shorex Singapore Real Estate Investment World Asia Real Estate Asset Enhancement World Asia Real Estate Latin America Forum Dates 24-25 April 2012 24-26 April 2012 25 - 27 April 2012 22 - 23 May 2012 26 - 28 June 2012 25 - 27 September 2012 1 - 2 October 2012 Location London Hong Kong Miami Singapore Singapore Singapore Sao Paulo Organizer Infoline APREA Opal Group Shorex Terrapinn Terrapinn Latin Markets

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