Vehicles targeting core assets account for the overwhelming majority of the European real estate fund industry, reflecting an increasing risk aversion among fund managers and investors, according to new research from advisory firm Swisslake.

The research indicates that fund managers are increasingly launching core funds to offset the risks created by the financial crisis and to cater for changing investor demands.

Private equity real estate funds which launched value-add and opportunistic funds in early 2011 to benefit from rising stock markets and positive economic data are now switching back to core strategies, Swisslake said. Since the second quarter of this year, the shift in risk-return profile allocations towards core strategies - which began in 2009 - has accelerated.

The EUR 4.1 bn dedicated to core funds in Q3 2011 (2011: EUR 9.9 bn) is a value - also in terms of absolute volumes - that was last reached in the first quarter of 2010, the findings show. The vast majority of the equity being raised by core funds in Q3 2011 is intended for office and retail investments (72.4% of the target equity volume).

In terms of geographic allocation, Germany leads the list of target countries. After an unusually high market share of 50.6% in Q2 2011, the allocation declined in Q3 to 38.5% (EUR 2 bn target equity volume).

Looking at the first nine months of 2011, EUR 6 bn of equity is being raised for German investments, representing 37.5% of the entire market.