Looking for larger returns? It might be time to think small. That’s because smaller and newer private real estate funds outperform their larger counterparts by 156%. According to data from Preqin, funds of less than $500 million in size that began investing between 2005 and 2011 posted median returns of 5.9%. That’s more than double the 2.3% return for funds over $1 billion.

The lower return generated by the larger funds isn’t affecting their ability to raise capital though. Funds of $1 billion or more in size raised 56% of the total capital raised in 2013, compared to 29% of capital the year before, despite the relative outperformance of smaller funds in recent years.

Preqin notes that the heightened risk that often accompanies an investment in real estate funds is likely to account for the low levels of current investment in smaller funds.

“Smaller private real estate funds have frequently outperformed larger offerings in recent years, with newer firms also more likely to have outperformed their more established counterparts,” said Andrew Moylan, head of real assets products for Preqin. “There are likely to be many reasons for this, with smaller managers potentially more nimble when making investments and newer firms more motivated to prove their worth.”

Moylan noted that institutional investors are more likely to invest with fund managers that have provided consistent returns in the past. “Recent fundraising data shows the largest players have accounted for a growing proportion of all private equity real estate capital being raised,” he said.

“Many large, established players do have strong track records, and often institutional investors are looking to invest with managers that have evidence of generating consistent returns. However, those institutional investors that have the skill and resources to seek out attractive emerging managers have the potential to be rewarded for doing so,” Moylan added.