Jockey Club invests in real estate

Land ho! A leading Hong Kong institution mandates DeutscheÆs RREEF for its first exposure to global real estate.
The Hong Kong Jockey Club has awarded RREEF - which is a Ç51.8 billion real-estate and infrastructure investment specialist owned by Deutsche Bank - a mandate in the range of $100-200 million for a global real estate exposure.

Jacob Tsang, treasurer at the Club, says it is increasing its exposure to alternative investments. The Club was the first institutional investor in Hong Kong to take up funds of hedge funds. ôWithin the alternatives space, there should be other alternatives,ö Tsang says.

He declined to detail the firmÆs commitment to alternatives. The ClubÆs latest annual report shows that about $200 million of the portfolio has gone to alternatives as of June 30. But since then it has made additional contributions to hedge funds and now with the RREEF mandate, its total commitment may have at least doubled.

The Club, which receives assets from its horseracing and online soccer gambling activities, doesnÆt disclose its total assets under management, but the May edition of AsianInvestor magazine estimated these at $4.8 billion. So its exposure to alternatives has risen to an estimated 12% of AUM this year.

Tsang does say the Club has a long-term target exposure it is still moving towards. Additional mandates in the real-estate sphere may be considered: the Jockey Club reviewed six managers from which it selected RREEF but it may consider these other finalists later.

In terms of other asset classes, it may be some time before the Club makes a move. Tsang says he doesnÆt like commodities because the asset class is too volatile. The Club has studied private equity but has yet to decide whether to pursue opportunities there.

Real estate offered an attractive mix of diversification, low correlation to other asset classes, and absolute returns. Although property prices are high in many markets, the Club is investing in a fund that is diversified worldwide, and through retail, commercial, industrial and hospitality sub-sectors.

ôWe use active managers who invest in the ævalue addedÆ and æopportunisticÆ strategies,ö Tsang explains. ôAlthough the underlying is all bricks and mortar, there are other factors that can influence the outcome of investment.ö

But, he adds: ôIf you think hedge fund [investments] are difficult to implement, try real estate. It is esoteric... we came through a steep learning curve. We believe a diversified portfolio of real estate should improve the risk and return characteristics of the traditional portfolio, given its low correlation and absolute-return orientation.ö

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