Multi-billion dollar demand for Asian real estate investments has boosted the fund raising efforts of global managers such as Prudential and CLSA.
But while Asia’s non-listed real estate vehicles association, Anrev confirms that pan-Asia core funds are the hot ticket, a lack of core assets means that there is room for value-added funds, two of which have raised around $1.5 billion in the last few weeks.
Anrev released a survey this week highlighting the rising prominence of core real estate in Asia-Pacific. “Pan-Asia core open-ended funds are what investors are looking for” said Anrev’s research director Amelie Delaunay.
Historically, Australia and Japan-focused core open-ended funds have been available but not core pan-Asia funds. That is changing, with managers such as Morgan Stanley Real Estate Investors looking to raise at least a billion dollars into their pan-Asia core funds.
Meanwhile, a number of value-added funds have recently reached close. This week, for example, Prudential Real Estate Investors reached first close of its third Asia Property Fund (ASPF III) at $530 million, 20% over its initial fundraising target.
That fund is mandated to make core, value-add and select opportunistic real estate investments and attracted institutional investors from Europe and the Middle East.
Last month, CLSA Capital Partners exceeded its $850 million fund raising target, reaching a $1 billion final close of Fudo Capital III – a value added investment vehicle which also attracted investors from Europe and the Middle East.
By final close, the fund had already deployed over 25% of capital in office, retail and logistics assets located in Hong Kong, Nagoya, Shanghai and Tokyo.
Fund raisings have continued despite real estate fund managers sitting on a record amount of dry powder, commitments raised but not yet deployed.
That follows record fund raising last year. Anrev’s Delaunay said that “Asia-Pacific still has room for more in 2015”.
At the same time, Anrev’s survey highlighted the fact that, globally, nearly 70% of sovereign wealth fund commitments in 2014 were to opportunistic funds, while pension funds and insurance companies preferred to allocate to open-end funds and core strategies.
Anrev found that pension funds accounted for 44% of capital invested into Asia-Pacific funds last year, far ahead of sovereign wealth funds (12%) and insurance companies (10%).
This week, accounting firm PwC released a report estimating that pension fund assets would rise from $37.1 trillion in 2013 to $56.6 trillion by 2020. “A fundamental shift towards alternatives by sovereign and public pension funds” would contribute to real estate and infrastructure investments rising 8.9% per year to 2020, representing the fastest growing alternative asset class.