Some investors increased their modest real estate allocations, while others filled out their allocations last year, said Andy Smith, managing partner and CEO of L&B Realty Advisors.
A number of funds raised in 2007 and 2008 were coming to the end of their three-year investment periods last year, Ms. Lashine said.
“There was a lot of money committed that had not been invested,” she said.
These calls for the cash represented by fund commitments caused real estate assets under management to increase at pension funds because many U.S. pension funds account for real estate fund commitments when they are called, rather than when the commitments are made, Ms. Lashine said.
Real estate managers got tired of waiting for a buying opportunity from distressed property owners following the 2008 economic meltdown, said Kevin White, director of business development at Virtus Real Estate Capital LLC, an Austin, Texas-based real estate fund manager.
“Everyone expected a big, epic rash where borrowers threw their keys at the banks and there was blood on the street,” Mr. White said. “People are more confident in the overall economic conditions and that incidences of the throwing of the keys are fewer and far between.”
Virtus closed its fourth self-storage fund with $100 million in September.
It took a critical mass of both deals and investor interest in a fund's particular investment strategy to bring enough capital to close a fund last year, said Justin Metz, managing principal of Related Fund Management LLC, a subsidiary of the Related Cos., New York.
When Related closed its $825 million Related Real Estate Recovery Fund on Jan. 25 — its first distressed fund — it already had invested 25% of the fund's capital.
“We built more and more momentum the more (fund) closings we had,” Mr. Metz said.
While investors' passion for private equity is evident from the 16% hike in P&I's numbers, the love does not extend to all sectors. Pension fund executives are still not that crazy about big buyout funds, while some of the hottest private equity funds last year were sector funds.
“There continues to be a rebalancing across buyout strategies. Specifically, investors are shying away from mega buyouts in favor of small/middle market buyouts U.S. pension funds ... and often prefer more specialized sector-focused funds,” said Jay Rose, partner in the San Diego office of private equity consulting firm StepStone Group. “Some of the best sector-focused managers raised funds in 2011,” he added.
Megabuyout funds returned 12.5% for the year ended Sept. 30, compared with the return of all U.S. buyouts of 13.41% for the same time period, according to data provided by Cambridge Associates.
Small-cap buyout funds, those with $300 million or less, had the best performance among buyouts fund — 18.03% — for the 12 months.
Parag Saxena, founder and CEO of New Silk Route Growth Capital, Mumbai, which invests in private equity in India, said the economic and growth challenges facing the U.S. and Europe are forcing U.S. pension plans to look at the emerging markets.