As a result, prices–theoretically–should be falling, he explains, but there hasn't been enough market activity to get a good sense of that. “The transactions that are closing now were on the table before the credit problems,” Syers says. “We need more transactions to see where we are.”

But private equity funds are seeing opportunity in the credit crunch. “It is interesting, because you are now seeing a number of distressed debt funds forming to take advantage of the opportunities where others are having problems,” explains David Ziegler, an assurance partner in the Real Estate Group in New York City.

The next few months will tell what impact the woes have on the expectations fund sponsors harbored in the first half of 2007. According to Gary Koster, Americas leader for Ernst & Young's Real Estate Fund Services, the firm's recent survey found that responding private equity funds raised $23.5 billion in the first half of the year, with the expectation that new funds would raise another $35 billion through the end of 2007. That figure puts 2007 on target to exceed the $38.7 billion raised in 2006, he adds.

Overall, fund sizes are increasing, Ziegler says. The average size of funds raised from 2005 to 2007 was $84.4 million, up 79.5% from 2001 to 2004. And more than a third of the funds started over the past 18 months were raised by new fund sponsors, he points out.