Japanese institutional investors are increasingly looking to invest in overseas markets via partnerships or fund investments but long queues for global open-ended core vehicles are a key entry barrier, according to panelists speaking at PERE’s annual real estate conference in Tokyo today.
“Whenever people in the US hear about the magnitude of Japanese capital, they have a misconception that they will cut large checks like $500 million or so.”
– Fred Uruma
“Many Japanese institutional investors we are speaking with, especially pension funds want to invest smaller ticket sizes in commingled core funds in Europe and the US. But the fund entry queue is long,” commented Ryohei Kawasaki, fund manager, private asset investments in the strategic fund investment group at Asset Management One.
While the waiting time for investing into US core vehicles have traditionally been longer than Europe, Kawasaki said that has now changed. The general waiting time to commit capital to open-ended core funds in Europe for example is now between 9 to 12 months. In contrast, he noted that the waiting time for US vehicles had almost eliminated last year, in light of the cancellation in some commitments and withdrawals from funds. However, in his view, the queue has started again since the second quarter of this year.
With a growing number of Japanese investors, including Government Pension Fund Investment (GPIF) and Japan Post, preparing to make investments in overseas real estate, there could be as much as ¥300 billion ($2.67 billion; €2.25 billion) waiting on the sidelines to be invested, according to Hidekazu Ishida, chief advisor at System 2.
However, despite what the panelists described as a popular misconception in the West, these investors will make a relatively small first step back into global real estate, and would prefer to partner with investment managers than invest directly.
“GPIF, Japan Post and Chikyoren are like mega dams that have water in them,” said Fred Uruma, president, chief executive office, Touchstone Capital Management. “They have stayed inbound until now and now they want to go abroad to create yield. However, whenever people in the US hear about the magnitude of Japanese capital, they have a misconception that they will cut large checks like $500 million or so, similar to what the US pensions invest. However, I don’t know any Japanese institution that will cut such a big check.”
Tetsuya Fujita, president at CBRE Global Investors in Japan said the Japanese investors should also consider alternative investment options in the interim waiting period for typical fund commitments.
“You could come in as a secondary investor in a fun or do a programmatic venture, if you can’t go into a fund,” he said.