Club investment into Asia property rising fast

Capital raised for investment in Asia-Pacific real estate grew by a very healthy 25% to $22.9 billion in 2016, with joint ventures and club deals accounting for 28.8% of that total, nearly treble the 9.9% the year before, according to new research.

In fact, Asia Pacific was the only region in 2016 to see an increase in money raised for investment into its real estate, found a capital raising survey* published last week.

Asia-Pacific strategies accounted for 17.8% of the $128.4 billion raised for property investment last year, as against Europe's 46.5% and North America's $33.3 billion.

The threefold increase in money raised for Asia-Pacific property through JVs and club deals reflects investors' desire to have more direct access to the market and more control of their investments, said Amélie Delaunay, director of research and professional standards at the Asian Association for Investors in Non-listed Real Estate (Anrev).

Indeed, the amount raised for Asia-Pacific property through funds fell to 51.2% from 61.6% of the $22.9 billion (though the absolute amount going into such funds rose slightly), according to Anrev.

Pension funds dominant

Meanwhile, pension funds grew strongly as a source of capital for investment in Asia-Pacific property last year, reflected the trend globally. They accounted for nearly half (47.7%) of the total raised, up from 33.4% in 2015.

Delaunay, who is based in Hong Kong, told AsianInvestor this was down to a drive by pension funds to diversify their portfolios.

Meanwhile, sovereign wealth funds' share fell heavily to 13.2% from 20.1%, by Anrev data. Insurers' share stayed almost flat at 10.8%; it was 11.6% in 2015.

The breakdown broadly reflected the global trend, with pension funds overall accounting for 47.1% of the $128.4 billion raised, followed by insurance firms (17.3%) and sovereign wealth funds (8.9%).

Meanwhile, fund managers in Asia Pacific continue to make significant use of placement agents, which accounted for 29.2% of the total equity raised in the region in 2016, noted the Anrev report. In Europe and North America this percentage was less than 5%.

Delaunay said this may be because Asia Pacific is a less mature market than the US and Europe and many investors are new to the region, meaning relationships need to be built.

Asia attraction

Perhaps for a similar reason, home bias is particularly prevalent among Asia-Pacific fund managers. They raised the highest proportion of capital to be allocated within their own region: 92.9%, with 3.1% allocated to Europe and 3% to North American vehicles and 1% to global strategies.

However, interest in Asia-Pacific property is also rising among investors outside the region. For instance, two British asset managers last year both made moves with a view to building their Asia real estate allocations.

Schroders started building a real estate investment team in Asia last September with the hire of John Chantrell. And property specialist Savills Investment Management opened an office in Australia last year and is in the process of setting up a Shanghai office, its first in China. 

*The survey was carried out by Anrev; the European Association for Investors in Non-listed Real Estate (Inrev); and NCREIF, a real estate data and index provider.