Tokyo-based Nomura Real Estate Asset Management, the property fund of funds arm of Japanese conglomerate Nomura Group, is plotting the launch of its third outbound real estate fund of funds by the end of this year, PERE can reveal.
Unlike its previous two funds, which both closed on approximately $100 million, this vehicle will be open-ended, and is expected to target approximately $300 million in equity commitments over the next three to five years. Nomura is expected to start the soft marketing for the fund next month.
The strategy for Nomura Real Estate Fund III is expected to partially follow that of its predecessors, focusing on open-ended core and core-plus property vehicles globally excluding Japan. This new incarnation, however, will include no allocation to value-added, distressed or debt funds, which the first two funds also included. Historically, investments have been between $10 million and $20 million, and both Fund I and Fund II are fully invested now.
Nomura’s investors are all domestic institutions, mainly pension funds. However, the firm is also expected to target commitments from several banks and fiduciaries. Japanese institutions such as the $1.3 trillion Government Pension Investment Fund are notorious for being conservative when it comes to allocating to alternatives, especially overseas. After years of debating, GPIF finally made its first concrete allocation to infrastructure just last month.
The benchmark return for Nomura’s second funds of funds was between 8 percent and 10 percent before fees. However, it is understood that the final benchmark return for Fund III has not been set yet.
Fundraising for Japan has skyrocketed in the past year, with Secured Capital hauling an impressive $1.5 billion for its fifth fund, GreenOak Real Estate raising $260 million for its first Japan fund and the Abu Dhabi Investment Council raising its logistics joint venture with Goodman Group to $800 million. Unlike Nomura’s new fund, however, the vast majority of the capital has been focused inward rather than outbound.