It’s a tale of contrasting fortunes in Asia.
JP Morgan Asset Management’s purchase of Aviva Investors’ $1.2 billion Asia-Pacific direct real estate business has grown its regional property assets by 41% to $4.1 billion, expanded its investment footprint and raised its real-asset headcount by one-third.
The moves comes as the US fund house – with a presence in Hong Kong for 35 years – has had success in further expanding its business in the past few years across both institutional and retail segments. Moreover, its global real asset (GRA) unit plans to open a Tokyo office next year.
Meanwhile, Aviva Investors, the fund management arm of UK insurer Aviva, scaled back its Asian headcount as part of a global restructuring in late 2013 and early this year. This came after it had built a substantial investment and sales presence in Singapore after switching its regional headquarters there from Australia in 2010.
Industry observers said the Asia direct property business was not big enough to provide sufficient scale as a stand-alone unit.
The sale will see Aviva Investors’ Asia-Pacific AUM fall from $6.8 billion to $5.6 billion. This includes $3.4 billion of Asian fixed income and $1.7 billion real estate multi-manager assets, which continue to be run out of Singapore.
The Aviva Real Estate team of 16 property professionals will grow JP Morgan’s real estate team to nearly 50 in Asia Pacific. That is 12.5% of GRA’s 400-strong global team, as compared to the region’s 5% share of the unit’s $82 billion in AUM.
Having a relatively large team in Asia is not unusual, said Chen, given the continent's broad geographical spread, multiple languages and need for people on the ground.
The acquisition adds Australia, New Zealand and Japan to JP Morgan AM’s emerging markets-heavy property portfolio. The US firm’s existing regional real estate investments are focused on residential, commercial, mixed-use and hotel assets in Greater China and India.
This addition of core and core-plus strategies brings JP Morgan’s Asia real estate assets more in line with those in US and Europe. The latter two have a relatively higher core and core-plus investment weighting, and include the largest core property fund in the US, the $24 billion Strategic Property Fund.
The firm now runs a full range of strategies in the region, said David Chen, chief investment officer for Asia real estate in the GRA division.
Along with two flagship funds – the Tokyo Recovery Fund and Aviva Investors Asia Pacific Property Fund – the acquisition also adds commercial RE portfolios in Australia, segregated accounts and club deals.
The deal will expand JP Morgan AM’s Asian client base, said Chen, which is mainly institutionally focused, but it also includes high-net-worth individuals.
It will also increase the number of partner asset managers and property management firms that the GRA team works with in Asia. For example, Hong Kong-based private equity firm PAG’s Secured Capital is the asset manager for The Tokyo Recovery Fund. Chen said JP Morgan AM will continue to work with Secured even after it opens the GRA office in Japan next year.
The GRA division’s Asia-Pacific AUM is now roughly evenly split between real estate and infrastructure. Maritime assets – the third area of GRA coverage – are not included in the $4.1 billion of Asian AUM because the strategy is run out of London, but it includes Asian assets.
Rumours of the Aviva-JP Morgan deal had been reported in the first half of the year. “The news got ahead of itself,” said Chen, noting that any multi-jurisdictional deal takes a long time to conclude.