Private equity intelligence firm Preqin is noting a change in the strategy of funds of funds. The managers of these investment strategies, which invest in other private equity real estate funds, are shifting to a more risk-averse mentality.

"88% of funds of funds closed from 2010 to May 2012 target opportunistic funds, while 72% of funds currently in market have a preference for such funds," said Farhaz Miah on the Preqin blog.

It's important to understand to the great extent opportunistic funds are favored among these private equity players.

The reduction shows us two things about the evolving investment strategy of private equity real estate funds of funds. The first is that there is a decreased appetite for certain types of risk. And this leads to the second aspect where investors may be pushing for additional resources allocated to other dislocations in the markets.

Further, the movement of these players is trending toward a strengthening of core funds. Also, core-plus fund portion is growing too.

So it seems that in order to attract greater investor interest, real estate funds of funds are adopting more conservative strategies.