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Investors slow commitments to Asian non-listed RE funds

Even though investments into Asian, non-listed real estate funds have dipped markedly in the short-term, allocations to the sector will increase over the next three to five years.

Asian non-listed real estate funds are expected to maintain investor allocation growth over the next three to five years despite a current reduction in commitments, according to the European Association for Investors in Non-Listed Real Estate Vehicles (INREV).

In its Investment Intentions Asia 2009 survey, held in conjunction with Asian Real Estate Association (AREA) and the Pension Real Estate Association (PREA), INREV said 50 percent of investors surveyed would increase their allocations to Asian, non-listed real estate funds despite having put short-term allocations on hold.

Only 24 percent said they would increase their allocations over the coming one to two years.

Lisette van Doorn, chief executive officer of INREV, said the short-term pause by investors “totally reflects the current market circumstances where investors are concentrating on their existing investments.” She added that the same sentiment was being felt by those participating in INREV’s Investment Intentions Europe Survey, which was published at the start of the year.

The Asia survey attracted 73 responses, up from 65 last year.

The expertise behind non-listed fund management platforms was the main driver for continued investor interest, the survey revealed, although access to new markets and sectors was also regarded a key reason for investing in Asian non-listed funds.

Nick Loup, co-director of AREA and chief executive officer for Asia Pacific of London-based property group Grosvenor, said: “The survey shows that the underlying benefits of non-listed property funds are clearly recognised by investors.”

Despite the positive sentiment towards continued allocation growth, respondents said that a lack of transparency was a “main challenge” when investing in non-listed vehicles.

The survey added that the more optimistic medium term view coincided with respondents beliefs that Asian real estate markets in general will recover in 2010.

The survey said 67 percent of investors and 72 percent of fund managers felt a recovery was likely next year. However, 50 percent of fund of fund managers, felt a recovery was more likely in 2011, although INREV said that this more negative outlook could be because they generally invest adopting higher risk strategies.