Features
Considerations for investing in private equity real estate funds relative to other forms of investment include:
- Substantial entry costs, with most funds requiring significant initial investment plus further investment for the first few years of the fund.
- Investments in limited partnership interests (which is the dominant legal form of private equity real estate funds) are referred to as "illiquid" investments which should earn a premium over traditional securities, such as stocks and bonds. Once invested, it is very difficult to gain access to your money as it is locked-up in long-term investments which can last for as long as twelve years. Distributions are made only as investments are converted to cash; limited partners typically have no right to demand that sales be made.
- If a private equity real estate firm can't find suitable investment opportunities, it will not draw on an investor's commitment. Given the risks associated with private equity real estate investments, an investor can lose all of its investment if the fund performs badly.