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Asia-Pacific Asset Managers Investing in Private Real Estate Funds - November 2013

by Ee Fai Kam

  • 06 Nov 2013
  • RE

Asset managers in Asia-Pacific are significant investors in private real estate funds. In fact, they form the third largest group of investors in the Asia-Pacific region that are interested in private real estate funds (with the top two being superannuation schemes and insurance companies). Asset managers are unique in that they provide a platform for retail investors to gain access to otherwise inaccessible real estate investment opportunities. Preqin’s data shows that there are 24 asset management firms based in Asia-Pacific with an aggregate AUM of $520bn. Currently, these 24 firms have a combined allocation exceeding $2.9bn to private real estate funds. With such a substantial amount at their disposal, what strategies and where are these asset managers investing in?

The flight to safety and quality has always been a dominant theme in uncertain economic times, and this is reflected in the observation that 85% of Asia-Pacific asset managers are interested in real estate funds employing the core strategy, making it the most common fund type. It is understandable then that a closely-related strategy – core-plus – is the next most sought after (50%) fund type by these 24 institutions. Less than half (45%) are interested in debt vehicles while 40% will consider opportunistic private real estate funds. Asia-Pacific asset managers avoid fund of funds vehicles; only 1 out of the 24 firms is open to such investments. It is perhaps of no surprise that funds of real estate funds have not found favour with asset managers as their clients may potentially be saddled with multiple layers of fees.

In terms of geography, Asia-Pacific-based asset managers predominantly invest in Asia (71%), while Australasia attracts 57% of the asset manager investor pool. This home region bias stems from investor familiarity with the social, economic and political climates of the Asia-Pacific market. The vast and diverse North American market commands the interest of 43% of Asia-Pacific asset managers, while 38% find Europe as an attractive investment destination. Twenty-nine percent of Asia-Pacific asset management firms will consider investing in one of the most promising emerging markets – South America. 

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