Ian Hally is CEO for Asia-Pacific real estate at Aviva Investors in Singapore. For the past three years, his team has managed about $1 billion of Asian real estate, mostly on behalf of UK-based parent Aviva Insurance.

How do you manage your portfolio?
Ian Hally: We concentrate on the strategically important markets of Japan, Australia, China, India and Korea. We invest both directly as well as via the multi-manager or fund-of-funds route to external private-equity managers.

What do clients want in real estate?
Globally, they are polarised right now. Some are risk-averse and only want exposure to core and core-plus assets. Others are very opportunistic and only interested in things like distressed assets. Our strength is in the core and core-plus sectors. We acquire, manage and sell investment-grade assets, using our asset-management skills to add value.

Japan and Australia are the best markets for this type of risk. To an extent, this also works in Korea, Singapore and Hong Kong. These markets have size, they are mature, they are transparent and there's plenty of supply.

But you also invest in big emerging markets.
China, India and the rest of emerging Asia are more about development projects, not income streams. The long-term holy grail for institutional investors is to complement existing exposures in Japan and Australia with core-plus exposures in China. Institutional-grade real estate does exist in China. We've invested in a fund that owns shopping malls that are fully leased to anchor tenants and enjoy nice cash flows. But there remain emerging-market-type risks. The key to operating directly in such markets is finding the right partner.

Do you also invest in real-estate securities?
We're building that capability. There is more demand among global institutions for the income from Reits [real estate investment trusts], and the liquidity and high dividend yields that property stocks can deliver.

Would you seek to invest now in listed real-estate securities in China or Hong Kong?
It's become slightly easier to get capital in and out of China, and the local banks are liquid. But it's hard to tell whether a lot of that government-backed lending is temporary. In some cases it has supported developers with poor fundamentals and allowed them to avoid distress. Assets are not on the market and prices have gone up, and this effect has rippled into Hong Kong, where stocks are expensive and real-estate yields are falling. This is unlike other markets in Asia.

So there's not much value in China or Hong Kong?
Not right now -- but we are not time-sensitive, we can wait. The story will be there for a long time, and we can take advantage of it once we find the right local partner. The investment themes about China haven't changed: the rise of the middle class, of urbanisation, of wealth creation. We have confidence that the restructuring of the economy toward domestic demand is headed in the right direction.

Is India on your radar screen?
International investors are putting India to one side for the moment. A pension fund in the United States can find better risk-adjusted value at home. Besides, developers in India are concentrating on their existing portfolios and not looking for new capital.

What's the best investment opportunity in the short term?
The best risk-adjusted returns are in Australia and Japan. These offer less risk for the same returns you'd get in China; the regulations are more certain.

What's the story in Japan?
It's about good-quality assets in Tokyo, especially offices. We're not pricing in growth, but given the cap rates on assets and our ability to manage these assets to grow or protect income streams, we're waiting for capital to return. It will come from Reits or overseas private equity. Buy now and sell later. 2010 will be a good vintage for buying core-plus markets in Asia. This year there hasn't been enough confidence among institutional investors or local lenders, but Japanese banks are slowly coming back to the market.

Is it the same for Australia?
Australia was the last real-estate market to correct during the crisis, and values there are still going down and may have further to go. We invest throughout the cycle, but now is not yet the time to buy aggressively.

South Korea seems stuck in the middle.
It is in the middle. Korea has bucked most global trends. Its local financial institutions are well capitalised. We're seeing active buyers. There is fierce competition to buy new assets, which has bid down yields. The economy has stabilised and offers mature, transparent assets. But Korea doesn't offer top value compared to other Asian markets. On the other hand, Korea has proven to be a source of capital to invest regionally or globally. Korean investors like real estate, but right now they find themselves strategically underweight and need to diversify overseas.