It is a fairly irregular occurrence when the manager of a fund defects on the eve of its launch; even more so when that happens after just four months in the role. Hence, the departure of Gillian Chee from AEW in Asia, just as the firm is mid-launch on its first Asia core vehicle, caught our attention. She had joined in May to help steer its introduction.
PERE understands the Boston-based manager’s original plan was to launch the fund before the end of this year and to achieve a first closing on $500 million. AEW declined to comment on its fundraising, so a perspective on what Chee’s departure means for the manager’s progress with the launch is hard to obtain. But that does not prevent a debate as to whether it should impede its efforts or not.
Generally speaking, the nature of core investment and management should, in theory, mean fund managers can be more interchangeable than those managing higher risk and return strategies. Core properties should be easily characterizable, require minimal repositioning and offer a bond-like, coupon-clipping-style return. Subsequently, the lower skill requirement should come with fewer consequences in the cases of departures: carried interest is not earned and things like key-person clauses are not required, as they are with value-add and opportunistic strategies.
Specific to AEW is the fact that it has yet to start a track record in core investing in Asia. If the manager is to lose an executive tied to the gig, it has to be now, before fundraising and, critically, before any deployment. Performance-reputation preservation is, hence, not a factor in this instance.
Still, the flipside of the same point is that, given this is AEW’s first try at an Asia core fund, the optics of any senior attrition on the eve of its launch will need careful explanation to the investors, particularly given Chee’s particularly brief tenure. Additionally, this is a nascent time for the Asia core real estate market broadly. As such, it requires commitment from the managers, but also their senior staff, in the push to get their products away.
There are only eight economies and 15 cities that carry core characteristics, according to the latest research from investment bank JP Morgan. There are even fewer core funds to have raised institutional money in the region. According to real estate research organization ANREV, there are eight pan-Asia core funds that have corralled a total of $13.8 billion so far.
If AEW wants to take its position alongside Asia’s other early core market movers, it will want to settle a team dedicated to the task. But while replacing Chee will be a job to do, it should not be seen as a major challenge. In Asia, the manager is better known for running value-add capital presently under the leadership of long-time veterans, regional head David Schaefer and chief investment officer Jason Lee. If one of them was to jump ship, that would be another matter.