Property private equity fundraising slows-report

* 208 private equity funds launched in 2010 vs. 296 in 2009

* European, Asian funds lift market share; U.S. funds don't

LONDON, Jan 27 (London) - The number of real estate private equity fund launches and the amount of equity targeted in 2010 plunged by about a third, with the sector struggling to shrug off its recessionary blues, a survey showed.

Property equity advisor Swisslake Capital AG said 208 new funds were launched globally in 2010, down 35.6 percent on 2009. They were seeking to raise $74 billion, 29.7 percent down on the prior 12-month period.

"This is primarily due to the fundraising pace that has drastically slowed down as the global (financial) crisis occurred and never quite managed to pick up since the recovery began," the report said.

This was aggravated by the tight supply of prime commercial buildings coming to market in some regions and strong demand for those when they were put up for sale, the report said.

"The multi-speed economic recovery surprised many fund managers who were expecting a rather uniform recovery across the globe," Swisslake said in the report.

European property -- in particular the UK, Germany, France, Netherlands and the Nordics -- witnessed a sharp yield tightening, stabilising rental levels and a rise in transaction volumes in 2010. Over the year European funds raised their market share to 38.3 percent from 29.7 percent in 2009.

Funds targeting Asia-Pacific and in particular China, India and Australia, increased their market share to 15.5 percent, from 9.7 percent, reflecting the warmer economic outlook in those countries. [ID:nLDE70O1S5]

In contrast the proportion of new funds in North America dropped off to about 36.9 percent, from about 42.8 percent, a shift that Swisslake said implied the "market is currently saturated and investors' demand for North America still remains weak."

Meanwhile, the year also saw the average fund size taper off to $355 million, from $388 million in 2009, $588 million in 2008, and $619 million in 2007.

"The trend towards smaller funds is not merely a consequence of investors' demands but also due to the lack of investment opportunities as most fund managers are chasing similar deals ... The era of mega-funds (of $500 million-plus) is for the time being definitely over," the report said.

Open- and semi-open-ended funds had gained slightly in popularity in 2010, accounting for 13 percent of those launched in 2010, and closed-ended funds 87 percent, Swisslake said.

In terms of allocations, diversified funds continued to dominate, claiming 42.8 percent of the target equity, followed by retail-focused funds at 11.3 percent, and residential at 11.5 percent. (Reporting by Andrew Macdonald; Editing by Greg Mahlich) (See www.reutersrealestate.com for the global service for real estate professionals from Reuters)