Preqin’s recent study investigating institutional investor attitudes towards Asian private real estate found that 68% of institutions were likely to make new commitments to private real estate funds in the next 12 months. Participants were asked whether they would consider committing to Asian funds in the next 12 months, and of those likely to be active in the coming year, 42% said that they are likely to commit to Asia-focused funds. These findings are indicative of improving investor sentiment towards private real estate and to Asian property, and suggest that 2011 could mark the beginning of an upward trend in real estate fundraising.
67% of respondents that said they are likely to invest in Asia will look to do so through pan-Asian funds. 20% stated a preference for global vehicles and 13% would seek country-specific Asian funds. Investors named China, India, Japan, Singapore and South Korea as countries they found particularly appealing. 15% of participants that are likely to commit to Asian funds in the next 12 months will be making a maiden allocation to the region, suggesting that Asia-Pacific real estate is attracting new investors.
Preqin asked investors about their main motivations for investing in Asia, and whether they believed funds investing in the region would provide superior returns in the long term compared to vehicles targeting developed markets. The most commonly cited reason for investing in Asia was achieving portfolio diversification. 43% said that the projected superior returns from Asian investments attracted them to such vehicles, and 39% stated that they aimed to take advantage of the region’s growth potential.
67% of investors that had previously committed to Asia-focused funds, or are looking to do so in the next 12 months, believe such investments will provide superior long-term returns compared to developed economies. 19% thought Asian funds would not provide superior returns and 14% were unsure as to whether such funds would perform better than those investing in developed markets.
The outcome of this study has a number of positive implications for Asia-focused fund managers and the private real estate market as a whole. With 68% of participants looking to commit to private funds in the next 12 months, and over a third of this group looking to commit to Asian vehicles, 2011 may see an increase in investor commitments to all funds as well as vehicles investing in Asia.
68% of respondents have invested in Asia through managers headquartered in that region and this highlights investor confidence in the more recently established Asian real estate firms. Institutional investors largely believe that the economic growth in the region will continue to fuel the growth of Asian real estate markets, with 67% of investors interviewed believing that their Asian investments will provide superior returns compared to developed markets. The Asian private real estate fundraising market therefore seems likely to regain momentum over the coming years.