Allianz Real Estate to grow Asia investment to 15% of AUM or €11.1bn
Allianz Real Estate, the captive investment and asset manager for the Allianz Group, currently has €7.1 billion under management in Asia, comprising 9.6% of its total €74 billion AUM. However, Rushabh Desai, CEO of Allianz Real Estate’s Asia Pacific business told AsianInvestor that in the coming years the target is to increase this to close to 15% or the equivalent of €11.1 billion.
Since current global CEO Francois Trausch joined Allianz Real Estate in January 2016, the company has been steadily rebalancing its allocations away from Europe, which comprises 65% of total allocations and towards the US, which currently comprises 25% and Asia at 10%.
Trausch hired Desai to grow the Asia Pacific business in September 2016.
Total AUM in Asia has grown 120% since 2018 (when it stood at €3 billion), far outstripping the 33% growth in global AUM. In Asia, offices comprise 31% of total AUM; logistics 30%; student housing 10%; retail and residential each 7% and other 15%.
The majority of Allianz Group’s liabilities remain in Europe, but the shift is designed to improve diversification and capture growth, said Desai.
The Allianz Group’s allocation to real estate has not changed significantly in recent years and the sector remains an attractive prospect because of stable long-term growth potential, according to Desai.
Allianz Real Estate does not invest for any of the Allianz businesses in Asia, but this may change in the coming years with Allianz’ businesses expanding fast in countries like Malaysia and Indonesia.
Growing direct investing
Allianz Real Estate’s Asia asset growth has been focused on direct investing - a category that includes co-investments and joint ventures. This grew from €1.4 billion in 2018 to €4 billion in Q1 2021, overtaking indirect investing, which grew from €1.6 billion to €3.1 billion.
“We started with fund investments and co-investments alongside the funds. Once we had established credibility, internally and externally, we moved on to joint ventures, club deals and direct investments. In 2020, we launched our 'invest alongside Allianz' strategy in Asia via our $2.3 billion 50-50 venture with the National Pension Service of Korea”, he said.
“The portfolio is equally balanced between fast-growing markets like China and India, and advanced economies like Japan, Australia and Singapore. Selectively we invest in Hong Kong and Korea as well,” Desai said.
The Asia business has been hiring at the rate of nearly 10 people per year in the last few years. Today, 40 people are employed across the region – Allianz Real Estate’s first Asia office opened in Singapore in 2009 followed by Shanghai and Tokyo in 2020.
Having focused on building up the Singapore investment and asset management teams since he arrived, over the past 18 months Desai has concentrated on growing the mid-office and back-office functions such as risk, legal, finance, tax, and IT infrastructure.
Boots on the ground
He said in Asia Allianz Real Estate is seeking to open a local office when the local portfolio reaches a meaningful size that requires boots on the ground.
“We are invested in 8 markets within Asia, each having its own nuances. Once you’ve got the direct portfolios, you need to have operational staff that has expertise in each of the local markets. This has been further validated by Covid-19 where international travel restrictions mean that local on-the-ground staff is a must,” Desai said.
Hiring is likely to continue but at a slower rate, he said.
The planned opening of a new office in Australia last year was delayed by Covid; it will likely be the next Asia office to open although India also has a growing portfolio which may warrant a team on the ground in the coming years, he said.
Third-party capital
“In the last two years Allianz Real Estate has raised over €2 billion of third-party capital from like-minded institutional investors investing alongside Allianz, 70% of which is for Asian ventures and 30% for European ventures,” he said.
The principal among Asian ventures, launched with the National Pension Service of Korea in 2020, is AREAP Core 1, a closed-end Singapore domiciled $5.4 billion investment platform, including $2.3 billion of equity. Allianz Real Estate is the investment manager and general partner; NPS and Allianz group companies are 50/50 investors.
Desai said that the 'invest alongside Allianz' strategy provides diversification benefits for investors, allowing them to invest in a larger number of assets on a wider footprint. It also provides the scale to secure prioritized access to opportunities, especially where deals are particularly large such as in the residential and logistics sectors.
He said that while Allianz Real Estate did not have specific targets for working with third party clients, the strategy has so far been well received by like-minded investors particularly those looking to invest in Asia and Europe.