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Asia attracts surge of new funds

A wave of new property fund launches across Asia indicates that the region’s markets are set for rapid growth.

Although Japan remains the leading market for some investors, India, China and even emerging markets such as Vietnam are drawing interest from all corners.

Morgan Stanley has raised $8 billion, the largest property fund yet, and is setting its sights on Asia, including India. Morgan Stanley Real Estate Fund International VI has $1.6 billion from its parent company and the rest is coming mainly from institutional and retail investors in North America, Europe, the Middle East and Asia.

LaSalle Investment Management (see Cover Story) intends to triple its Asian investments to $20 billion over the next three to four years.

Jack Chandler, LaSalle IM’s Asia-Pacific chief executive, expects the largest inflow will go to Japan but the company will also look to invest in such markets as China, Hong Kong, Taiwan, South Korea, Singapore, Thailand, Australia and New Zealand.

Chandler says Asian funds have been outperforming other regions and investors need to have international real estate in their portfolios; LaSalle’s Asian funds have outperformed other regions over the past four years.

Prudential Property Investment Management’s chief executive for Asia, Jonathan Allen, says its open-ended property fund for the region is likely to grow to more than $1 billion in assets from the present $600 million in the near future, thanks to investor appetite for Asian property.

The fund is hunting investment opportunities in Japanese office, and retail and logistics properties, as well as offices in Australia and Singapore.

PruPIM is also raising money for a Vietnam property fund that will close during the third quarter this year and should start investing in the fourth quarter. Allen says PruPIM’s Vietnam fund will probably be less than $500 million because of the country’s relatively small property market.

Henderson Global Investors is set to launch a $1 billion Asian property fund. The Henderson Asia Pacific Indirect Property Fund (Pagoda) will invest in listed and unlisted Asia-Pacific property vehicles.

Mizuho Bank is marketing a diversified mutual fund of stocks, bonds and Reits in Asian markets outside Japan and Australia.

In India, DLF Assets is looking to raise $1 billion for a property fund. It is also planning to sell shares in an IPO within the next two years and become a Reit once the government gives such vehicles the green light.

DE Shaw and Lehman Brothers have invested $400 million in DLF, which is aiming to acquire 10 million sq ft of property each year.

Another Indian development involves Singapore’s Ascendas, which manages offices and industrial parks and has launched a S$500 million ($325 million) fund focusing on office projects in India. The India Development Trust has a target size of S$1 billion, according to Ascendas.

Investor interest in Asia is also coming from the Middle East. Dubai’s state investor Istithmar is forming a $50 million property fund with a unit of Singapore’s City Developments to build 30 budget hotels in Southeast Asia. Istithmar will have 40% of the fund, as will City e-Solutions – a Hong Kong-listed unit of Hong Leong Group that controls CityDev. The new fund might eventually be sold to CDL Hospitality Trusts, CityDev’s Singapore-listed real estate trust.

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