Aberdeen Property Investors is in defensive mode after holding the final close of its second Asia-focused fund of funds vehicle.
The AIPP Asia Select fund closed on just less than $200 million in April, half the equity commitments it had originally anticipated when the fund was launched more than 18 months ago.
Given the cautiousness of investors globally, the slowdown in fundraising shouldn't surprise API's head of indirect investment management, Jon Lekander.
However, what Lekander is focused on are the investments he and API's indirect funds platform, Aberdeen Property Investors Indirect Investment Management, hope to make in the future – especially as the firm tries to mitigate the increased risk of investing in Asian property funds.
AIPP Asia Select will keep equity in reserve as a protective measure in case the funds it invests in run into financial issues. Lekander said: “This is not because of their own liquidity issues. Everyone has those issues. This is to address risks in the future.
The firm is taking two measures to tackle this risk. The first is straightforward. The AIPP Asia Select fund, which follows on from Aberdeen's $600 million inaugural vehicle which closed in September 2007, will not make any investments in underlying funds before the end of the summer at the earliest and Lekander envisages few outlays this year.
The second measure is a little more unorthodox. AIPP Asia Select will keep equity in reserve as a protective measure in case the funds it invests in run into financial issues. Lekander said: “This is not because of their own liquidity issues. Everyone has those issues. This is to address risks in the future.”
Lekander, who took over as head of the platform in October last year and is in charge of three out of twelve funds under Aberdeen Property Investors' management, would not divulge what proportion of the fund would be held in reserve but confirmed the amount would be “significant”.
In a further measure to mitigate risk, Lekander said the fund would invest less with “boutique” fund managers and more with established managers.
The AIPP Asia Select fund was targeting an original final close of $400 million but as the credit crunch and global economic downturn took effect, investors became more cautious about committing to the vehicle, alongside others in the market. Investors in the vehicle come only from Europe, with a number from the Nordic countries.
The fund has a lifespan of 10 years and is targeting an IRR of between 13 percent and 17 percent.
API's first vehicle still has scope for “one or two” more investments, Lekander said, adding that of the funds it has already committed, only half has been called. The fund has invested in both value-added vehicles in Asia's mature markets but has also made some “niche” investments in China and India.
API's Asian funds of funds investment platform is run by fund manager Puay-Ju Kang, who leads a team of four from its Singapore office.