PERE Forum Asia 2009: GPs approached for shorter fund vehicles

As limited partners see distressed development as an investment opportunity, they are asking general partners for shorter fund lengths.

Limited partners investing in development are asking for shorter timeframes for future vehicles in which they could invest, according to some general partners in Asia.

Speaking to delegates at the PERE Forum: Asia 2009 conference in Hong Kong today, Don Lam, co-founder and chief executive of Vietnam focused fund manager VinaCapital Group, said he had been approached by LP’s to create a five year vehicle with an extension possibility for two further years to take advantage of the developments that are part-finished.

He said: “They said to us: if we go to the market today, we assume that you can access developments which are half finished. Therefore, you can turn it around and then sell them off [quicker].” Lam said he was last approached by investors seeking this quicker invest and exit strategy within the last eight weeks.

Ng Beng Tiong, fund director at ARA Managers, said in order to take advantage of the current investment cycle, where developers require financing midway through projects, shorter life vehicles are viable options for general partners going forward.

However, the notion of a departure from more traditional eight to ten year vehicles, could prove dangerous, said Pietro Doran, chairman and principal partner at Korea focused Doran Capital Partners. He warned that such vehicles could be caught out by factors such as currency fluctuations and investment regulatory changes which can happen quickly and sometimes with little warning, particularly in Asia’s less mature real estate markets.