For the first time in two years, non-listed real estate funds in the Asia Pacific region have performed better than equivalent funds in the US and Europe, according to the latest findings by the Association for investors in Non-Listed Real Estate Vehicles (ANREV).
The outperformance was led largely by the successful termination of some of the opportunistic funds in markets like Japan, the association said.
Findings from the Global Real Estate Fund Index, a global performance index jointly run by ANREV, European counterpart INREV and US association, National Council of Real Estate Investment Fiduciaries (NCREIF), reveal that the 79 APAC funds recorded a performance of 3.6 percent in the fourth quarter of 2014, ahead of the 3.1 percent and 2.4 percent recorded by the US and European vehicles.
Much of this improvement can be attributed to the opportunity funds in the region, which were in the liquidation phase end of last year, and were successfully exited, explained Amelie Delaunay, director of research and professional standards, ANREV.
“We are pleased to see that Asia Pacific has outperformed the US and Europe, which is a big change compared to the previous seven quarters when the US was outperforming, reflecting an improvement in the performance of non-listed in some markets such as Japan…” she added.
Australia has been cited as the best performing market in the region, where the funds generated returns of 2.8 percent in Q4 2014, up from the 2.2 percent in the third quarter.
The most visible improvement, however, has been in the performance of the Japanese funds. Japan’s property market had been sluggish until 2013, Delaunay said, but began to recover following macroeconomic reforms in the country. The index has estimated that the 17 funds, whose performance was evaluated, recorded returns of 7.9 percent in the last quarter of 2014, significantly up from the 2.2 percent returns generated from 16 funds in the previous quarter.
The renewed interest in Japan is also reflected in ANREV’s investor intentions survey released early this year, in which investors cited Tokyo as their top investment destination for 2015.
Asia also outpaced Europe in terms of fund returns for the whole of last year, clocking 9.44 percent annualized returns as compared to 8.90 percent in Europe. The funds raised in the US, however, remained on top, generating returns of 11.81 percent.
The findings have received a measured response from industry. Andrew Moore, the chief executive officer of the Hong Kong and Singapore-focused private equity real estate firm Pamfleet, told PERE that while the numbers posted in the index were encouraging, he advised caution against reading too much into the performance of just one quarter, especially since the indices are still open and can receive further updates from funds.
Moreover, for countries like China, the index has been able to receive performance figures for only seven funds, which may not be representative of the entire market.
The global index, officially launched in April last year, is calculated on the basis of the quarterly NAVs of the fund and other estimates, including capital calls, redemptions and distributions.