Opportunity funds might be fun and sexy, but most investment consultants and institutional investors are sticking with safer types of real estate strategies.
Opportunistic managers generally have the leeway to invest in whatever they can to generate the highest rate of return. Hence, the funds carry more risk.
"It does not appear that there is as much institutional interest in opportunity funds as in other types of real estate," said John Gray, senior managing director in the real estate group at The Blackstone Group, New York. "People still seem fairly risk averse. There is a push for more real estate exposure, but REITs and core investing seem to be the primary beneficiaries."
And some opportunity fund managers contend big real estate consulting firms can be a roadblock, because their specialization lies in core investment and they do not understand opportunistic real estate investments.
Consultants, however, say the performance data support investing in only the most exceptional opportunity funds.