Investors are leaving the financial crisis in the West behind them when it comes to investment strategies. They are pumping money back into real estate, source of many of the worst crisis woes. In Asia, they show a propensity for riskier, clubbier deals, too.
Total assets under management in real estate globally rose to $2.5 trillion as of the start of the year, according to fresh figures from ANREV, the Asian Association for Investors in Non-listed Real Estate Vehicles. And while listed property products may draw much of the financial ink, non-listed products actually capture four-fifths (80.4% for those counting down to the dime) of all property investment.
Although non-listed products typically have a large barrier to entry in terms of investment, it is possible to invest in many of the managers themselves. I’ll highlight which of the major global and Asian players are listed lower down.
Real estate may be back in fashion, but the global financial crisis did prompt a shakeout among real-estate managers that is continuing. As elsewhere in the investment world, the largest funds are only getting bigger while smaller ones struggle for funds.
The top 50 managers now oversee $43 billion in assets, on average, up 25.8% over last year. Overall growth is close to half that, at 14.2%.
The Blackstone Group (BX) sits atop the pile, with $150.9 billion under its belt, narrowly ahead of Brookfield Asset Management (BAM) and its $148.0 billion in assets. PGIM, the asset-management arm of U.S. insurer Prudential Financial (PRU) , is the only other manager to cross the $100 billion mark, in third place at $121.7 billion.
ANREV conducted the study with its European counterpart, INREV, and its sister group in the United States, NCREIF. Across the three regions, they polled 177 managers.
In my part of the world, the manager ranks are dominated by players from Singapore and Australia. The list of the largest managers when it comes to Asia Pacific strategies is topped by one of the oldest hands in the business, CapitaLand (CLLDY) , with $42.4 billion in assets.
Chinese capital is increasingly influential. Fosun Property Holding has risen to No. 2 in Asia, with $32.4 billion in assets under management. It’s the real-estate arm of the massive Fosun Group conglomerate, which has a listed overseas unit, Fosun International (FOSUY) .
Mapletree Investments, like CapitaLand part of the state-linked “Singapore Inc.,” is next with $23.6 billion. Sydney-based industrial and warehouse and logistics operator the Goodman Group (GMGSF) is in fourth spot with $20.2 billion.
Asian sovereign-wealth funds such as the China Investment Corp. are increasingly influential investors when it comes to listed and non-listed real estate. Occasionally, they turn fund and property manager, too, meaning Asian governments indirectly own real estate in other nations.
Mapletree is backed by Temasek, which manages money for the Singapore government (although it hates being called a sovereign wealth fund — they’ve called me to complain before!). Temasek also owns a large chunk of CapitaLand.
Mapletree itself manages four Singapore-listed REITs, Mapletree Logistics Trust SG:M44U, Mapletree Industrial Trust SG:ME8U, Mapletree Commercial Trust SG:N2IU and Mapletree Greater China Commercial Trust SG:RW0U. But it also has five unlisted funds. Its portfolio is focused on Asia and Australia, but it owns serviced apartments in the United States and student accommodation in the United Kingdom.
The remainder of the largest Asia-focused managers are all Australian. But they generally have either a U.S. ADR or a local listing to access.
Vicinity Centres A:VCX, Lendlease Investment Management (LLESY) , Dexus Property Group A:DXS, the AMP (AMLYY) subsidiary AMP Capital, Kenedix (KNDXY) from Japan and the GPT Group A:GPT round out the top 10 managers in Asia. Only Tokyo-based Kenedix isn’t based out of Oz.
Fund managers should be turning to pension funds and insurance companies for their sources of capital. Those two groups, combined, make up almost two-thirds (63.7%) of all capital in unlisted real estate, and a similar share of separate accounts.
But for joint ventures and club deals, sovereign wealth funds are major players. That helps explain the prevalence of those types of structures in Asia.
Joint ventures and club structures are far more popular in Asia than in other parts of the world. They account for 28.0% of the non-listed property assets in Asia, but only 16.0% of the investment in North America and 10.1% of the total for Europe.
That’s also partly a feature of the maturity of the markets. The club deals are typically small in Asia, so they make up more than half (55.8% to be exact) of all the nonlisted vehicles in the region, when you look simply at the number of funds by category. There’s nowhere near the sheer volume of club deals in other parts of the world.
There’s a much greater emphasis on risk in Asia, as befits a part of the world with so many emerging economies. Almost one-third (28.4%) of the nonlisted property funds are opportunistic, more than double the rate in Europe and four times the share in North America.
More than three-quarters of the funds in the developed world focus only on core holdings, the figure being 78.2% for Europe and 75.9% for North America, while core funds make up just over half (58.4%) of the funds in Asia. A handful of particularly large core funds dominate the American market.
Investors looking for risk and nimbler, smaller funds, should head to Asia.