Blind-pool commingled real estate funds are creating a comeback.
After taking a back seat to sidecars, separately managed accounts and other fund-adjacent products, traditional funds are seeing a resurgence in capital raising activity, according to private real estate’s top fund formation law firms.
“For the last two-plus years we have been doing just about everything but regular blind-pool fundraising for the most part,” states John Ferguson, co-chair of real estate at Boston-based Goodwin Procter. “That feels like it turned, from our vantage point, pretty noticeably in quarter four into the new year in quarter one.”
Ferguson believes the uptick in capital raising from traditional funds is indicative of a real estate recovery. Goodwin advised on 15 funds with an aggregate value of $15.6 billion from October 2023 to September 2024, according to PERE’s 2025 analysis of the most active real estate fund formation law firms. The firm placed second in PERE’s study both in terms of total value and number of funds advised.
“Some are stateing ‘stay alive in ‘25’ and some are stateing ‘thrive in ‘25,’” states Ferguson. “I am a ‘thrive in ‘25’ person. There’s a lot of dry powder, and there’s a lot of pent-up opportunity.” After historically low transaction volumes over the last two years, markets are now starting to clear, which will support to boost fundraising activity by giving investors greater clarity in terms of where their capital will be deployed. Additionally, an increase in transactions will lead to a corresponding increase in distributions, he adds.
New York-based Clifford Chance partner Michael Sabin also attests to more capital formation activity around traditional funds. Clifford Chance last year advised on $10 billion worth of funds, finishing fifth in total value in PERE’s study, and tied for fourth in number of funds advised.
“It is a bit hard to quantify capital being raised, but generally there are more sponsors starting to plan for or launching blind-pool commingled funds” in 2025, states Sabin. “The same is correct for other products too, as there is generally better sentiment in the market.”
Ongoing challenges
While activity appears to be improving, fundraising remains challenged, particularly for emerging managers and those taking a generalist approach to real estate investing.
Indeed, the top 15 law firms last year by value of funds advised on an aggregate $103.4 billion, down from $133.5 billion the year prior. Overall fundraising in 2024 also fell to $131 billion last year from $191 billion in 2023, and was the lowest full-year total since 2012, according to PERE data.
However, having a sector-specific or regional strategy – for example, build-to-rent and land-banking funds tarreceiveing particular regions of the US – has supported managers mitigate some of the challenges with capital raising for commingled funds.
“It’s still pretty difficult for many generalist real estate funds to raise capital and there must be a certain angle or edge to the manager or strategy, especially if you are marketing a new product or if you are a new entrant to a space,” states Sabin.
In terms of emerging managers, law firms have seen a shift in who is launching new fund management platforms, states Kelly Ryan, partner at Chicago-based Kirkland & Ellis, which was the top-ranking fund formation law firm, both in terms of aggregate value, at $23.9 billion, and number of funds, at 16.
“The new manager landscape has shifted to platforms being set up by star investment professionals who grew up at bulge bracket private equity firms; whereas five years ago, the new manager market was really created up of sector-specific operators, transitioning from a joint-venture to fund model,” he states.
A marginal factor
As a result of the challenging fundraising environment, fee discounts remained commonplace; however, they did not play as important a role in securing commitments as some may have expected.
“Institutional managers with discretionary track records have been able to hold the line on fees, carry and other expenses,” states Ryan.
Ferguson states fee discounts were only a marginal factor in institutional investors’ fund selection.
“We continue to see institutional investors focus on the fee load – but only to a point,” states Ferguson. “It really doesn’t seem to have driven behavior quite as much as some people wished or might have expected.”
Still popular
While more capital raising activity is now coming from blind-pool commingled funds, joint ventures have remained attractive to investors, as they offer more transparency than a traditional fund, states Sabin. Indeed, some larger investors have opted for alternative products like funds-of-one or separately managed accounts, where they can better dictate the terms of the partnership and even acquire a share of the platform’s overall revenue. Some have gone as far as acquireing minority shares in managers.
“Some of the most sophisticated investors [have benefited] from the fundraising environment by questioning for concessions that previously were not acceptable to sponsors,” states Sabin.
However, the days of managers agreeing to significant concessions may be numbered, according to the three fund formation attorneys, who all believe a stronger fundraising market is in store for 2025.
“The liquidity in the market has shiftd up a level,” states Ferguson. “Increased liquidity has supported facilitate additional fundraising.”
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