The Japan University Fund, the country’s biggest university endowment fund managed by Japan Science and Technology Agency, plans to expand into value-add and opportunistic real estate strategies but is eschewing one key market for now.
Ayaka Takimoto, executive director, head of real estate and infrastructure investments at JST, said at PERE Network Tokyo Forum last week that the investor has introduced value-add and opportunistic strategies into its existing core real estate portfolio. The fund is currently in the process of reviewing gatekeepers for the new strategies and is expected to finalize the candidates in the next few months.
While the newly established endowment has not disclosed its allocation target for real estate or details on its property portfolio, Takimoto noted that the investor first began investing in the asset class by building its core portfolio in Europe and Australia, with a particular focus on the logistics and residential sectors. JST will initially focus on real estate equity investments but will also review real estate debt opportunities going forward.
Despite wanting to build a diversified real estate portfolio both geographically and sectorally in the long term, the investor is cautious about investing in US real estate now. Takimoto expressed her concern over the US economic outlook, with the interest rate hike being one of the biggest risks.
“[The] interest rate is something that we look at very closely. We are trying to hear the views from various managers,” she noted. With that in mind, Takimoto thought the investor’s timing on making investment decisions in the US might be “delayed” despite transactions in the market picking up again due to price corrections.
In terms of sectors, JST sees logistics as a bright spot and also prefers niche property types such as data centers and specialist residential. However, Takimoto said it would become more challenging to pick real estate investments based on sectors going forward due to the highly publicized troubles in the previous sector darling of office.
Having launched in March 2022, the Japan University Fund was set up to provide “long-term” and “stable” financial support to Japanese universities for international research and studies of doctoral students. Since inception, the endowment has committed ¥130.9 billion ($882 million; €830 million) in real estate, according to its annual report for the fiscal year ended March 2023. To support the growth in real assets, Takimoto’s team has grown to five people since April 2022 and the executive will continue to actively recruit investment professionals. Prior to joining JST, Takimoto was a managing director and a head of product management at Mitsui & Co Alternative Investments.
Real estate, infrastructure and private equity/debt are the three main pillars of the investor’s alternative investment portfolio, according to the report. “From the perspective of risk diversification and ensuring medium- to long-term profits, JST will strategically promote alternative investment,” the investor stated in the report. With AUM of ¥10 trillion yen, alternative investments represent 0.6 percent, or ¥64.3 billion, of the current market value of its overall portfolio.