The general, the Asia-Pacific region is often seen as an emerging market; however there are seven nations within Asia Pacific that are considered developed economies, namely Japan, Singapore, South Korea, Hong Kong, Taiwan, Australia and New Zealand. These mature economies have well-developed financial markets and investments in alternative assets, such as private equity real estate, are commonplace. As of January 2012 there are 127 investors based in these seven locations that have an investment preference for private equity real estate funds. Together, these institutions manage $5.6tn in assets, with an allocation of over $156bn to the real estate asset class.
Australian asset manager Challenger Limited is one such investor in private equity real estate funds. It intends to commit at least A$300mn to core, core-plus and debt funds in 2012. It has traditionally taken a global approach towards private equity real estate investing, but will focus on the Japan and Asia Pacific markets this year. The A$28bn firm also gains exposure to real estate via direct assets and listed funds.
Government Employees Pension Service (GEPS) also commits to private equity real estate funds. With $4.5bn in assets under management, the South Korean investor is interested in core, core-plus and debt strategies. Investing in both the Korean and international markets, GEPS prefers project-specific funds over blind funds. For domestic vehicles, the pension fund primarily focuses on those investing in prime office buildings so as to obtain a stable rental yield. With a target allocation of 4% to the real estate asset class, GEPS is looking to commit $100mn to property investments in 2012, in order to make the 2% jump from its current allocation.
Another Asian investor based in the developed economies is Toshiba Employees’ Pension Fund. The $8.6bn pension scheme has an allocation of 2.9% to the real estate asset class and is invested in core and core-plus vehicles. As it has a relatively low investment risk appetite, it is not open to investment in funds employing value added and opportunistic strategies. Its geographic focus is solely on the domestic market of Japan, targeting assets such as office, commercial and residential buildings that are able to provide stable rental income. Toshiba Employees’ Pension Fund prefers working with experienced domestic managers and does not allocate to first-time funds.