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Asia-Pacific Pension Schemes in Private Real Estate Funds - February 2014

by Joyce Chee

  • 26 Feb 2014
  • RE

In recent years, there has been a rising trend of pension schemes investing in alternatives. The real estate asset class, in particular, has been favoured by pension schemes which are interested in stable and long term returns. While European and North American pension plans generally have a high regard for real estate, as seen by the healthy investor appetite of prominent investors such as Canada Pension Plan Investment Board, Asia-Pacific pension schemes are slowly but surely easing into the asset class. Japanese pension schemes, for instance, have started to shift their focus to real estate investments in a bid to boost returns as part of Japan’s efforts to stimulate its economy. So where are these pension schemes located in Asia-Pacific and what are their investment preferences?

Preqin currently tracks 33 Asia-Pacific pension schemes which are active investors in private real estate funds. Of this investor pool, 48% belong to the private sector while the other 52% are public pension plans. These pension schemes manage a collective $644bn in total assets, with an average allocation of $27bn to real estate. In terms of geographical location, a hefty 52% of Asia-Pacific pension schemes are based in Japan. South Korea-based investors account for 30% of these institutional investors while 9% of pension plans are located in Australasia. Six percent of these 33 investors are based in Thailand while the remaining 3% hail from Malaysia.

Private real estate funds employing core strategy are sought after by 84% of Asia-Pacific pension schemes as these vehicles are relatively stable with the promise of high income yield due to the nature of core assets. Core-plus and debt strategies are also attractive to Asia-Pacific pension plans; 56% of the investor pool will invest in each of these fund types. Forty eight percent have a preference for opportunistic funds while 28% of pension schemes are open to value added vehicles.

In terms of geographical preference, an overwhelming 75% of Asia-Pacific pension schemes are interested in Asia. A noteworthy 57% of these institutions have a global outlook while 50% of the investor pool view North America favourably. Forty six percent of pension schemes are inclined to invest in the European region. 

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