Preqin's Real Estate Online database currently tracks 111 pension schemes based in Asia and Australasia that invest in private real estate funds. With collective funds under management of over $2.2tn (of which over $53bn is allocated to the real estate asset class), this investor segment represents an important source of capital for real estate fund managers.
Australia-based superannuation schemes form a significant 75% of this investor pool, followed by Japanese pension funds which account for 13%. South Korea is home to a further 8% of these Asia-Pacific-based pension schemes, with the remaining 4% comprising of institutions from Malaysia, New Zealand, Thailand and the Pacific Islands. Given this breakdown, it should come as little surprise that Australasia is the most favoured investment destination among this investor group, with 78% targeting private real estate vehicles with a focus on this region. Forty-four percent of these Asia-Pacific pension schemes maintain a geographic preference for Asia, while 39% invest with a broad, global scope. Thirty-four percent of these institutions will consider committing to Europe-focused private real estate funds, while 32% favour the North American private real estate market.
Lower-risk core funds are the most popular fund strategy among Asia-Pacific-based pension schemes investing in private real estate, with an overwhelming 89% of these investors interested in such vehicles. However, these institutions also appear to have a strong appetite for higher risk/return strategies, as indicated by the fact that opportunistic and value-added fund strategies are the next most preferred, with 49% and 48% targeting these strategies respectively. Thirty-nine percent of this investor pool is interested in core-plus funds, while 23% favour debt strategies. Funds of funds and distressed vehicles appear to be the least favoured strategies with Asia-Pacific pension funds investing in private real estate, with only 17% and 16% willing to commit to these respective strategies.
The private real estate fund preferences of this investor segment appear to only be matched to a certain degree by current opportunities on the road. While there are 56 Asia and Australasia-focused private real estate funds in market, the majority (74%) of these vehicles employ opportunistic fund strategies. Core, the most popular strategy among Asia-Pacific-based pension schemes, is one of the least common fund strategies, with core funds comprising only 11% of Asia-Pacific focused vehicles on the road. However, there still remain suitable opportunities for Asia-Pacific-based pension funds among the private real estate vehicles currently raising capital. One significant example is SEB Asian Property Fund II, raised by Germany-based fund manager SEB Asset Management. The fund is targeting €600mn and plans to employ core, core-plus and value added strategies to invest in diversified property assets in Asian markets including China, Japan, South Korea and Singapore.