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Investment Opportunities in Asia-Pacific-Focused Private Real Estate Funds – March 2014

by Ling Yan Teo

  • 26 Mar 2014
  • PE

Preqin tracks 55 Asia-Pacific-focused private real estate vehicles which are seeking to raise $24bn in aggregate capital. The majority (73%) of firms managing this pool of 55 funds are based in Asia-Pacific, while 21% are from the US and 6% are Europe-headquartered. US-based fund managers are aiming to raise 45% of the $24bn in total capital, showing their significant presence in the Asia-Pacific fundraising market. 

Greater China and India are the most preferred locations by Asia-Pacific-focused private real estate funds, with 39% and 36% investing in these economies respectively. Australasia (18%) and Japan are in joint-third position, while Singapore (13%) is the last in the list of top five locations favored by fund managers. 

With respect to fund type, 66% of Asia-Pacific-focused vehicles take the opportunistic approach; such vehicles constitute the greatest proportion of the fund pool. Value added funds (48%) are also highly favored, while core-plus funds make up 16% and debt vehicles account for 14% of Asia-Pacific-focused private real estate funds in market. These are followed by funds utilizing the core strategy (11%) and the distressed strategy (11%). Interestingly, firms have a larger appetite for higher risks, which is aligned with investors’ preferences. According to Preqin Special Report: Asian Real Estate, opportunistic funds are the most sought after fund type by investors investing in Asia over the next 12 months. 

In terms of real estate sector, funds targeting residential properties, which include multi-family assets, are the most common - they make up 63% of vehicles investing in the Asia-Pacific market. Residential assets are attractive to Asia-Pacific-focused funds because home prices have risen significantly in the past few years in locations such as greater China and Singapore. Funds which are interested in the retail sector comprise 41% of the fund pool, while 39% will invest in office assets.

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