Property funds are putting off fresh capital raisings in response to the uncertain outlook for investments in the sector and a decline in distressed assets coming to the market because of easier credit for developers. It was difficult for underperforming real estate funds to raise fresh capital, while in the absence of attractive targets other funds remained cashed-up, said Goodwin Gaw, a co-founder of real estate investment fund Gaw Capital Partners Hong Kong. Just 60 per cent of the capital raised for the group's second property fund, Gaw Capital Real Estate Fund II, had so far been invested and the firm was in no rush to tap the private equity market for capital for a third fund, Mr Gaw said. Fund II raised US$800 million to invest in the property sector in Greater China and Asia-Pacific. In November last year, Gaw Capital said it planned to raise US$950 million for a third property fund to invest in first-tier cities. 'However, because of the investment climate, we are only a little bit more than halfway investing our Fund II so far,' Mr Saw said. 'With good investments harder to come by, we will likely take quite a bit more time before we complete our Fund II investment programme,' he added, saying that sellers were demanding unrealistic prices. 'Everyone, including us, is looking for distressed deals these days but China seems to be doing much better than the rest of world.' Since easier credit was made available by banks, key developers had achieved better than expected sales targets in the first quarter and domestic sellers were reluctant to dispose of their assets at steep discounts. In November last year, fund manager BlackRock Real Estate's team in Asia, based in Hong Kong since 2007, was recalled to the United States. The withdrawal followed the collapse of US investment bank Lehman Brothers and led to the departure from Hong Kong of four members of the real estate fund, which managed a portfolio worth more than US$24 billion. A spokesman at BlackRock said the move was made to achieve 'cost-effectiveness' and the team would continue to hunt for more opportunities elsewhere. Last month, media reports stated that Morgan Stanley was close to raising US$6 billion for a new global property fund, well short of its earlier target of US$10 billion. China Investment Corp has committed US$800 million in the Morgan Stanley Real Estate Fund VII Global. Morgan Stanley did not comment.