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Strategy Preferences of Asia-Based Real Estate Investors and Asia-Focused Private Real Estate Funds

by Ee Fai Kam

  • 24 Oct 2012
  • RE

There are 147 investors based in Asia which will consider investing in private real estate funds. Collectively, they handle approximately $11tn in assets under management, with about $1.8bn allocated to private real estate funds. Of these 147 investors, the overwhelming majority (94%) have a preference for investing in Asia. Therefore, it is important to know whether these investors are well-served by Asia-focused private real estate funds which are currently in market; this can be explored by comparing preferences of Asia-based investors and Asia-focused private real estate funds.

Preqin data shows that opportunistic private equity real estate funds are currently the most popular strategy among Asia-based real estate investors; 57% of this investor pool will consider investing in opportunistic vehicles. Coming in a close second is fund with a core strategy at 55%, while 50% of Asia-based investors will seek value added private equity real estate vehicles. Thirty-six percent of the investor pool includes debt funds as a preferred method for real estate exposure, 32% are open to investing in core-plus funds, and 22% seek vehicles employing a distressed strategy.

At present, there are 63 Asia-focused private real estate funds in the market. The majority of managers of Asia-focused private real estate funds recognize what the most attractive fund types for Asia-based investors seeking domestic real estate opportunities, with 73% of Asia-focused funds currently raising capital employing an opportunistic strategy. However, only slightly fewer investors have expressed interest in committing to value added vehicles; these funds are a distant second in terms of strategies sought by managers, with 29% of Asia-focused private real estate funds targeting a value added strategy. An equal proportion of core-plus, distressed and debt funds exist in the fundraising market; each strategy makes up 17% of the Asia-focused private real estate fund pool. Although core real estate vehicles are the second most sought after funds by Asia-based investors, they make up only 8% of all Asia-focused funds currently raising capital.

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