There is a lot of choice for investors who want to put their money into big property funds.
According to a survey carried out by the Asian Association for Investors in non-listed real estate vehicles (Anrev) and Asia Property, these are the top 10 managers targeting Asia, ranked by assets under management in their unlisted property funds:
1) Morgan Stanley $22.3 billion
2) AMP Capital $16.7 billion
3) Lend Lease $10.2 billion
4) Goodman Group $8.9 billion
5) UBS Global Asset Management $8.6 billion
6) LaSalle Investment Management $8.2 billion
7) MGPA $7.7 billion
8) Pramerica Real Estate Investors $6.9 billion
9) Dexus $6.3 billion
10) ING Real Estate Investment Mgmt $5.7 billion
Is everyone in that list? We don’t see CLSA Capital Partners and Goldman Sachs, for example. RREEF is in there, but for just $375 million in Asia, which seems surprisingly low. (RREEF also disputes this number and says it has $5 billion currently invested in Asia Pacific, with another $500 million of "dry powder".)
When asked if they had future plans to launch new funds, every single one of the respondents said ‘yes’. In illiquids fund management, it seems if you don’t have plans for something that will happen next, you risk being regarded as something of a zombie fund.
In the world of property funds where physical assets are an unavoidable part of the package, one of the difficulties about handling a big fund is that you have to deploy your assets in large-scale projects to make it worth your while. Hong Kong-based Property expert Peter Churchouse once described them to AsianInvestor as ‘monster property funds stomping around like elephants’.
Less monstrously scaled funds can be more nimble and look at a different set of mid-size property that the big funds often don’t bother with, and can make good money doing so.
Hence we see niche specialists in the list, which can deploy sums commensurate with the market, such as the redoubtable Sniper Capital, which is chalked up on the survey for $160 million. (Unless you are a casino developer building a replica of Venice, what are you going to spend $5 billion on in Macau?)
However, doing due diligence work on small buildings does not require a proportionately smaller amount of fund manager man hours. It's still a lot of work. So there is a point at which having a small fund isn’t going to be appealing.