While direct real estate investments are often more prominent and widely reported in the industry, private real estate funds remain a more accessible route to market for many institutional investors, and hence the preferred avenue for property investments in Australasia. Of the private real estate investors with a geographical preference for Australasian investment, only 48% invest directly.
Preqin’s Real Estate Online service tracks 158 private real estate investors with a preference for investing in Australasia, representing at least $361bn of capital allocated to the real estate asset class. The majority (63%) of these investors are Australasia-based.
In terms of strategy, an overwhelming 84% of these investors utilize core funds, with core-plus funds targeted by 51% of investors. Given that the most numerous investor type in this group are superannuation schemes (46%), which typically have relatively conservative investment appetites, it is unsurprising that the top two strategies preferred are lower down the risk/return spectrum.
Out of the pool of 158 unlisted property fund investors interested in Australasia, the median allocation to real estate is 8.2%. One prominent Australasia-based investor that invests in its home region is QIC, an Australia-based asset manager with over AUD 77bn in assets under management (AUM). The investor pursues a diversified set of strategies and has a 15.5% allocation to property.
An alternative method of gaining access to real estate for private real estate investors is through co-investments. Traditionally, the ability to co-invest has gone hand in hand with the sophistication and size of an investor, due to the need for significant internal resources and knowledge. Australasia-based investors investing in their home region that are open to co-investments have average AUM of $26bn, whereas investors which are not open to co-investments have average AUM of $7bn. However, from March 2014 to March 2015, there was a 13% increase in the number of Australasia-based investors that were either investing or considering investing via co-investments, demonstrating that the number of investors seeking this alternative route to market is increasing as many institutions seek greater control over their investments.