ASIA NEWS: Running on soft cash

Two years ago, a general partner faced with just €130 million of soft commitments from investors a whole four months after launching a fund might have considered reassessing its strategy.

Not so now. With so many limited partners no longer even pretending they are still active investors, to ensnare such a figure, even on a soft basis, is worth talking about.

Bo Jensen, managing partner at Danish firm Sparinvest Property Investors, had hoped to tell PERE about the first close of its second global fund of funds vehicle, the Sparinvest Property Fund II, in which the fund's allocation to Asia was to rise by 13 percent to 33 percent.

Instead, market conditions forced the first closure to be postponed until the end of March and for now, Jensen must make do with €130 million in loose commitments from its Danish pension fund investors.

But, he said, the trepidation shown by limited partners had not deterred Sparinvest's ultimate €500 million target which will remain intact. He said the buying opportunity story in Asia is also intact and may have even improved, as the continent's largest economies are impacted by the world's economic downturn.

“Investors' capital will be deployed over the coming three to five years which offers diversification across time. At the same time, it could prove to be a period of unique buying opportunities,” he said.

Asia's bubble has burst,” he added, “but we expect its growth to remain higher than in the US and in Europe in the long run. The investment fundamentals are still there.”

The Sparinvest Property Fund II is a global, value-added vehicle targeting a net return of between 10 percent and 13 percent by investing in what it classes are “hard to find, medium-sized funds with hands-on operating experience”. It aims to invest in a total of 15 unlisted funds and some of these may include debt funds. With sympathetic bankers in tow, it plans to carry a leverage rate of approximately 50 percent loan to value.

The fund intends to invest 60 percent of its equity into value-added funds, 30 percent into opportunistic funds, and 10 percent into core funds. The desired sector split is around 30 percent for office; 30 percent for retail; 10 percent for logistics; 15 percent for residential; and 15 percent “niche”.

Jensen insists the funds of funds model will still be effective during these uncertain times. “It's still a good model due to its diversity and foundation on managers with local expertise. You can take a hit in one place but then see profits in others.”