As a subsidiary of the $290 billion Canadian pension fund Caisse de depot et placement du Quebec (CDPQ), Ivanhoé Cambridge manages a $52 billion (C$70 billion) real estate portfolio with a mandate to develop and invest in high-quality properties, projects and companies that are shaping the urban fabric of cities around the world.
“We have these ambitions for our allocation to Asian real estate to at least double in size over the next few years,” George Agethen executive vice president and co-head of Asia-Pacific at Ivanhoé Cambridge told AsianInvestor.
In 2015, when Agethen joined Ivanhoé Cambridge, investment in Asia was mostly about China but has since expanded into other jurisdictions across the Asia Pacific. The fund’s allocation to the region has also expanded to represent 8% of its total portfolio.
“We have about C$7 billion ($5.2 billion) in Asia real estate right now. [We have] offices in Singapore, Mumbai, Shanghai and have just opened our office in Sydney, and that gives us pretty good coverage for our portfolio as it sits right now, as well as our ambitions,” said Agethen.
CDPQ’s real-estate arm’s ambitions include increasing its allocation to Asia to 15% of its portfolio, which means doubling in size, as the subsidiary is generally underweight in the region in comparison to the MSCI Index benchmark, according to Agethen.
“Also when we look at long term growth fundamentals, such as demographics and population growth, Asia is a great diversifier for the portfolio that will build resilience into our global returns. So we definitely want to do more in the region,” he said.
Ivanhoé Cambridge’s 15% target has no fixed date and is not a case of “growth for growth’s sake”, according to Agethen, who also feels that the current volatility of the markets may slow the fund’s progress.
“It’s not necessarily the best time to transact at the moment, although we do see that there will be opportunities coming up with rising interest rates potentially affecting property values across the region.” he said
INDIA AND VIETNAM
Looking towards Asia’s emerging markets, Ivanhoé Cambridge views India and Vietnam as two key areas of interest for future real estate investments.
“India has great long-term potential and scale for growth, but it can be a tough market to execute in,” said Agethen. “Its population size and growing wealth within its demographics make it attractive. It is very friendly to foreign capital and there is a great need for modern real estate.”
Real asset investments from foreign sovereign investors are surging within India, particularly from Canadian pension fund’s like CDPQ, CPP Investments and Ontario Teachers’ Pension Plan who have all established headquarters in the country. Agethen said that this inflow of foreign capital is also improving the liquidity in the country’s markets.
“India launched its REIT market a few years ago and that seems to be going very well. There’s also a boom in manufacturing and I think India is a major contender for that China plus one diversification strategy,” he said.
Vietnam could also benefit from the migration of manufacturing out of China, and Agethen and his team have been spending a lot more time investigating the Vietnamese market and expanding their understanding of the country’s major real estate players.
“We have some indirect exposure to Vietnam through funds but nothing direct right now,” he said.
Ivanhoe Cambridge has an approximate 70/30 split between developed and emerging markets within the region.
“The key focus for the developed-markets side consists of Japan—mostly Tokyo and Osaka—Singapore, and Australia.”
China’s property sector has long been one its most important growth engines and has played a huge role in the country’s economic boom.
The ongoing property crisis in China which began with the default of major developer China Evergrande Group at the end of 2021 has greatly affected real estate investment in the region and incited a large-scale boycott of mortgage repayments from Chinese home-buyers.
Traditionally, Ivanhoé Cambridge has been very consumption driven in its real estate exposure to China, said Agethen, but is currently taking a step back to see how the crisis unfolds.
“We’ve invested in the country’s logistics, in its mixed-use projects—things like malls and offices—all of which rebounded pretty quickly in 2020 following the outbreak of Covid,” he said.
“This year has been one of the worst in terms of real estate performance that we have ever seen in China,” said Agethen
“China's real estate market right now is being impacted by a general lack of confidence across all stakeholders, whether it's the banks, whether it's the developers or participants. The zero Covid policy and the lockdowns in Shanghai have also greatly impacted consumer confidence, and it's still happening,” he said.
The environment in China now makes it difficult for Agethen and his team to plan long-term and make big capital spending decisions.
“For about a year now we've been risk-off on China and under allocated and we kind of have to wait for things to stabilise and for growth to start coming through again, before we would invest more,” he said. “I won't say we are not investing in China, but it's really hard right now to find that entry point.”