Invesco to rebalance exposure in its Asia core fund

Invesco Real Estate, the real estate arm of Atlanta-based investment manager Invesco, is reducing its office exposure in its Asia core fund as it rebalances the sector allocation in its portfolio.

The manager is planning to lower its office exposure in its flagship Asia open-end core vehicle Invesco Asia Real Estate Fund – which has a total gross asset value of more than $4 billion – by 15-20 percent in the next 12 months, according to a source close to the situation. Meanwhile, the firm intends to increase its exposure to multifamily and logistics. It is understood that Invesco will also explore opportunities in alternative property sectors such as self-storage and data centers.

Invesco Real Estate declined to comment on details of its allocation plans.

As part of the broader reallocation plan, the firm offloaded a prime office property in Seoul from its core fund at the end of October. Located in the city’s major business district of Gangnam, Majestar City Tower B was sold to a REIT vehicle managed by Korean real estate company Koramco for 520 billion won ($385 million; €360.5 million). The sale price was almost double that of the firm’s original purchase price in 2017. It is understood that part of the proceeds from the transaction will be invested in a multifamily project.

Calvin Chou, managing director, and head of Asia Pacific at Invesco Real Estate, told PERE the firm has been diversifying the portfolio of its Asia core fund from offices to more “preferred sectors” such as residential and logistics. “We have earned a fairly decent capital appreciation on Majestar and we felt at this point, it is best suited to use some of the proceeds to rebalance our portfolio.

“Frankly speaking, although the office markets are fundamentally sound and performing well in Japan and Korea, I think our inclination is still to lower some of the exposure that we have in our existing portfolio.”

While he declined to disclose the size of the core fund’s exposure to the office sector, he pointed out that the allocation is in line with most of the open-end core vehicles in the region. While Asia core funds’ average allocation to office dropped from 47 percent in Q4 2016 to 41 percent in Q2 2023, office still represents the largest sector exposure in these funds, according to ANREV.

Although most of the core funds in the region are still overweight to offices, Chou believed other managers of such funds also intend to lower their exposures to the sector as they rebalance their portfolios. Prior reducing its offices, Invesco’s rebalancing of its Asia core fund started with a shift from retail to industrial and logistics. Asia core funds’ average exposure to retail fell from 32 percent in Q4 2016 to 7 percent in Q2 2023. In the same period, the allocation to industrial and logistics increased from 13 percent to 38 percent.

Invesco’s decision to use the proceeds from its Majestar sale to acquire more multifamily projects also aligns with increasing residential sector exposure among Asia core funds. Not only did the funds’ exposure to the sector increase from 6 percent in Q4 2016 to 13 percent in Q2 2023, but the allocation to the sector in terms of gross asset value also increased tenfold, according to the Q2 2023 results from ANREV’s Open End Diversified Core Index.