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PERE China: The rise of Asian LPs

Asian institutional investors are allocating greater capital than their western counterparts in China and other Asian markets, said GPs and LPs at PERE’s China conference.  

Asian institutional investors have started to take up a growing share of the investible universe in the region’s property markets, according to panellists at PERE’s annual conference held in Shanghai last week.

Asian investors are understood to have allocated 30 percent to the region last year, more than the commitments made by European and US investors, remarked Johnny Adji, senior investment director at Cambridge Associates.

“According to our research, 25 percent to 30 percent of European and US investors’ capital should be allocated to Asia, but in reality it comprises only 10 percent of the investible universe in the region,” he noted.

The reasons are multifold. Macroeconomic jitters in Europe and the uncertainty emanating from the US presidential elections late last year are key push factors prompting Asian investors to redirect some of their capital back to their own region.

“Whether it is the sovereign wealth funds or public pension funds, we are getting greater traction from Asian LPs who want to take advantage of their familiarity with Asia and regional proximity coupled with their desire to put money in offshore markets,” commented Beng Tiong Ng, assistant group chief executive officer at ARA Asset Management, on some of the pull factors.

Talking about the preferred investment strategies of Asian investors, Thaili Chi, managing director for KaiLong Investment, said regional LPs have a greater appetite for co-investments compared with foreign investors. KaiLong Investment is currently preparing the launch of its second China-focused real estate fund.

Betty Wong, executive director, head of capital markets and investment services for China, at Colliers International, said this trend also holds true for fund managers deploying capital in China.

“We tend not to have a lot of European fund managers for China but we are seeing that US fund managers are getting a smaller and smaller share of the market, while there is a growing Asian investors market,” she added.