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CalPERS adds $300m to ARA China vehicle

The largest pension fund in the US has brought its backing of Singapore-based real estate investment manager ARA Asset Management to $1.3 billion after re-upping to a separate account mandate with Singapore-based ARA Asset Management focused on China.


The California Public Employees Retirement System (CalPERS), the largest US pension fund, has brought its backing of Singapore-based real estate investment manager ARA Asset Management to $1.3 billion after committing further capital to a China-focused separate account it has with the firm.

The west coast pension, with $238 billion of assets on its books, has committed another $300 million to ARA China Investment Partners (ARA CIP), a bespoke vehicle to which it committed an original $480 million last year.

In ARA Asset Management’s half-yearly results published yesterday, the firm said the total committed capital of ARA CIP now stands at $830 million. CalPERS has also previously backed ARA’s two opportunistic ARA Asia Dragon Funds (ADF) and that means its backing of the firm has reached $1.33 billion. The pension fund committed $500 million to ARA’s first Dragon fund and $50 million to its second.

“We appreciate the continued strong endorsement from CalPERS,” ARA Group chief executive John Lim said in an statement. “Our private funds division has grown from strength to strength, and it will continue to attract global institutional capital.” To date, Most of ARA’s investors in its four private funds are US or European pension funds.

ARA told PERE that the capital committed matched the scale of opportunity the firm currently sees in China. To date $300 million of ARA CIP’s committed capital has been deployed. A spokesman said it would likely be invested quickly as each investment would require sizeable equity cheques.

In its half-yearly results, the firm said management fees from its private funds were largely responsible for offsetting declines in other revenues. ARA Asset Management has posted a net profit of S$32 million for 1H2013, a 9 percent drop from the S$35.4 million the firm hauled in for H12012, as most sources of revenue including finance income and acquisition, divestment and performance fees, saw significant declines.

ARA’s management fees, on the other hand, saw an 18 percent increase to S$56.2 million from S$47.8 million in 1H2012, 70 percent of which came from its REITs and 30 percent from its private funds, according to the spokesman. That increase comes “on the back of higher REIT management fees, higher portfolio management fees from the Group’s Private Funds division and higher real estate management fees,” according to the statement.

The spokesman added that the firm’s institutional investors have not actually been requesting lower fees, but instead require better alignment of interests: they want ARA to invest more in its own funds. For example, ARA committed less than 2 percent of the capital for the $1.1 billion ADF I, but LPs required the firm to commit around 10 percent of the capital in ADF II, he said. “They want us to have more skin in the game,” he told PERE.

ARA’s net profit excluding market-to-market gains/losses, which excludes the volatility of its REIT valuations, actually landed at S$35.4 million, a 19 percent increase from the S$29.7 million of 1H2012.

With S$23.5 billion assets under management, ARA Asset Management is listed on the Singapore stock exchange and manages real estate investment through its REITs, private funds business, property management and advisory services.