Through undertaking in-depth interviews with over 130 institutional investors in Q1 2014, Preqin’s Special Report: Asian Real Estate, March 2014 found that there are notable differences between Asia- and non-Asia-based investors with regards to the location focus of funds they have previously invested in, with non-Asia-based investors favouring funds with a more broad geographic focus, and Asia-based investors more likely to target country-specific offerings. Investors located in Asia may be more likely to have more intricate knowledge of local markets and therefore seek to invest in those areas specifically, whereas many international investors have sought portfolio diversification through funds with a wider focus. Eighty percent of Asia-based investors have previously invested in private real estate through country-specific funds, compared to only 36% of international investors. On the other hand, 55% of international investors have previously invested in pan-Asia-focused funds, with 36% having invested in global funds and the same proportion in regional funds.
The main motivation for investing in the region demonstrate that investors’ key concerns often relate more to portfolio diversification than to achieving superior returns, with 58% of respondents stating that geographic diversification was the main reason they invest in Asia-focused real estate funds, while 42% mention returns as a key motivation. Other respondents stated that they had invested in Asia-focused private real estate as it was their local market or invested in the region to take advantage of a specific opportunity.
Through frequent direct contact with over 4,300 investors profiled on Preqin’s Real Estate Online service, we are able to build an accurate insight into the strategies and regions targeted by investors in the year ahead. Corresponding with the aggregate capital raised by Asia-focused private real estate funds increasing in 2013 in comparison to the previous year, investor appetite for investment in the region has increased over the last six months. North America- and Asia-based investors have shown the most significant increase in appetite for Asian investments, with 17% of investors based in North America including Asia within their fund searches in February 2014, compared to only 9% in July 2013; similarly, 71% of Asia-based investors target domestic investment as of February 2014, compared to 57% in July 2013. Over a 12 month period, Europe-based investors have demonstrated a significant increase in appetite for Asian real estate investments, with 41% targeting exposure in the region as of February 2014, compared to only 18% of European investors in February 2013.