M&G plans to haul $900m for Asia core fund

The real estate arm of UK insurer Prudential may be seeking to draw another $900 million of equity at least over the next 18 months.

M&G Real Estate is poised to embark on capital raising and deployment program that is intended to see it grow its Asia Property Fund, Asia’s first core real estate fund, to approximately $3 billion of assets under management, PERE can reveal.

In an effort to do that, the real estate investment arm of UK insurer Prudential hopes to coral another approximately $900 million of equity to add to the $1.2 billion already in the fund over the next 18 months, though the exact equity target is not yet set. The fund currently has assets valued at about $1.4 billion.

M&G declined to comment on its growth plans when approached.

The fund currently has eight assets across Singapore, Korea, Japan and Australia but the extra equity could see that total more than double. In addition, the firm is expected to stretch its strategy by diversifying further across property sectors in each of these countries. Over the past few years, M&G’s Asian team has grown to about 33 staff, and the larger team is expected to facilitate increased deal flow.

Core real estate in Asia as a strategy has grown exponentially in popularity over the past year and following the launch of various core funds certain investors have begun to commit equity. Last month, Invesco Real Estate raised $400 million for its core fund while. Meanwhile, Singapore-based SC Capital is in fundraising on a closed-ended core fund and Aberdeen Asset Management, the European fund manager that invests in real estate predominantly via multi-manager vehicles is to launch a core fund of funds for the region by the end of the quarter. M&G’s Asia Property Fund was launched in 2007 and is the oldest in the sector.

M&G is targeting for the fund returns of approximately 8 percent post-fees, however, at this point, its portfolio is understood to be generating returns of approximately 9 percent overall, with about 50 percent of that coming from distributions. The target leverage for the fund is approximately 30 percent.

In September, the fund saw about $112 million of units change hands, purchased predominantly by European and American institutional investors.

M&G’s chief executive and chief investment officer Scott Girard told PERE on the sidelines of last week’s Asia Summit in Hong Kong how more entrants to Asia’s core market is expected to bring more competition, but at the same time serves as a validation of M&G’s model.