It is a particularly difficult time for international capital to access US real estate right now. Beyond a protectionist government, rising interest rates and an increasingly unfavorable currency, the US market is cyclically topping out.

JLL reported US investment totaled $341.2 billion in the first three quarters of the year, 14.2 percent higher than the same period last year. The year should finish 10 percent ahead, the global broker said. But moderation is in order in 2019 when it predicts a 3 percent dip. Capital raising-wise, Q1-Q3 saw $33.69 billion raised for North American strategies, PERE’s own data show. The number for 2017 was $60.34 billion. PERE data include closed-ended vehicles currently, typically those used for higher risk and return strategies.

This context makes the incoming availability of the world’s biggest property fund – a core vehicle – for international investors all the more interesting. As PERE revealed on Wednesday, investment bank JPMorgan is on the cusp of permitting foreign capital into its Strategic Property Fund – the asset class’s Everest vehicle at a gross asset value of $43 billion ($33 billion net).

SPF’s dominance is palpable, easily dwarfing rivals in the NCREIF Fund Index – Open-end Diversified Core Equity index. For example, PGIM Real Estate’s PRISA I vehicle has $24.5 billion of gross assets; another, UBS Realty Investors’ UBS Trumbull Property Fund, has gross assets of $23.5 billion. We are talking about the biggest of the biggest here.

“Years in the making,” as one familiar source put it, JPMorgan Asset Management, the division of the bank with keys to the vehicle, has determined it would be accepting commitments from foreign investments for the first time in its 20-year history by next summer. Early bets as to how subsequently large SPF might become vary, with some guestimates extending to as high as $60 billion – almost 50 percent bigger than today.

But there are plenty of reasons why timing might not see such heights reached, at least not in the near term. For one, the fund’s recent performance is not as strong as the peers: SPF returned 1.79 percent in the last quarter and 7.18 percent in the last year, versus NCREIF NFI-ODCE average of 2.07 percent and 7.62 percent respectively, according to Callan Associates. Scale considerations might offset some of that margin.

That could be a moot point, however, when considering how international investors typically make smaller international than domestic bets when it comes to funds, often preferring separate accounts with greater controls when deploying overseas at scale.

In any event, would JPMorgan want to have significantly more capital to deploy at this ultra-competitive and keenly-priced point in the US market? Fifty percent more billions of dollars could easily be as much of a curse as a blessing.

Furthermore, by the time much of this capital reaches SPF’s coffers, the market will be well into JLL’s -3 percent year. PERE’s America conference last month agreed a downturn must be factored into any deployment strategy today, even if it could not predict when one might occur. The current queue to be invested in SPF is nine months to a year. Who would predict greater performance from the fund during that timeframe?

Nevertheless, that does not make the capital raising versatility a bad idea. Though the SPF has been adequately quenched with US equity to date, allocations to the asset class are increasing around the world and it would be nonsensical not to join rival ODCE offerings in opening to foreigners. Take the Japanese, for instance, who made their first big ticket forays in very recent times after aeons of preparation. Their globalization in the asset class is in its infancy but is here to stay and, further, Japanese institutions must back the asset class via funds right now, plus their biggest outlays will be core in orientation.

Long-dated vehicles, such as those on the ODCE, take a through-cycle view. As such, the pertinent question is not if its heavyweight will reach $60 billion but when that happens.

Write to the author at jonathan.b@peimedia.com