Fundraising for property, infrastructure on rise

Fundraising for Asia-focused real estate and infrastructure funds is up from last year, although North American and Europe-centric funds continue to raise the most capital, according to Preqin data.

There were four Asia-focused property funds that held a final close in the second quarter, raising $1.2 billion. That surpassed the $800 million raised by three European real estate funds in the same period. It is also up from the $900 million raised by five Asia-focused funds in the second quarter of 2012.

However, vehicles targeting North America continue to take the lion’s share of capital for the asset class, with 26 funds raising $15.3 billion during Q2 this year.

In general, fundraising for closed-end real estate funds is on the rise, with $17.3 billion raised in the second quarter, up from $7.5 billion during the same period last year. Preqin attributes this to an improved investor appetite for the asset class.

The biggest Asia-focused property fund to close in Q2 was the $683 million, mainland-focused Citic Capital China Retail Properties Investment Fund.

The biggest real estate vehicle overall to close during the quarter was the $5 billion Lone Star Fund VIII. It targets debt, distressed and opportunistic deals in Japan, the US and Europe.

Meanwhile, capital-raising for Asia-focused, unlisted infrastructure funds reached $1.2 billion in the first half of 2013, based on the five vehicles that held a final close, according to Preqin. That is up from the $800 million raised for the asset class in Asia in the first half of 2012.

By comparison, $805 million was raised by the only North American fund to close during H1 2013, the Energy Capital Partners Mezzanine Opportunities Fund. As the continent is a mature market for infrastructure, much of its opportunities lie in the energy sector, particularly in the areas of electricity stations and gas transmission and distribution.

However, Asia’s H1 2013 total was dwarfed by the 10 European funds that closed, raising a collective $11 billion. That accounts for most of the global $15.4 billion raised by private infrastructure funds that closed in the period, nearly double the worldwide sum of $8.2 billion in H1 2012.

The biggest Asian infrastructure funds to close in the first half have a mainland focus, with the Urban Construction Fund by Suzhou International Development Venture Capital Holding having raised Rmb10 billion ($1.6 billion), while the Macquarie Everbright Greater China Infrastructure Fund took in $870 million.

China and India are among the emerging markets in Asia that have been targeted by foreign capital for infrastructure investments, as urbanisation and population growth have created a need for roads, bridges, airports, ports and railways.

Preqin estimates that 74% of institutional investors have less than 5% of total assets invested in infrastructure, while 49% have a target allocation of above 5%, meaning that more capital will be available to allocate to the asset class in the future.