The Asia real estate multi-manager business of Aberdeen Asset Management, the European asset management heavyweight, is in the unusual position of having raised nearly as much in co-investment capital as it has for its third fund of funds.
As PERE revealed last month, the firm has raised an initial $242 million for its Aberdeen Asia Fund of Funds III. Alongside that, it has raised $230 million for sidecar co-investments. Both pots of capital have come predominantly from the firm’s European investor base.
Jon Lekander, Aberdeen’s global head of indirect investments, admitted that the fundraising was unusual, but he said it reflected an industry trend in which institutional investors are keen to partner with trusted managers through a club format or other types of joint venture investments. Aberdeen typically does not manage club structures, but its investors evidently like what the firm is doing in Asia to the degree they are willing to commit to the discretionary fund in order to have access to sidecar positions, where they can make direct investments.
“A lot of investors want a broad strategy, but they also want to tilt their portfolios when they find something that particularly appeals to them,” Lekander said. “What we constantly do is adapt ourselves to what is happening in the market.”
While Aberdeen’s investor base is predominantly European, US investors also have been approaching the group for bespoke investment mandates. In February, the Employees Retirement System of Texas awarded Lekander’s division with a €85 million multi-manager mandate for Europe and the UK. The $23 billion Texas state pension system tapped Aberdeen to construct and manage a pan-European portfolio across a broad spectrum of funds targeting all property types in the region. Although Aberdeen will seek opportunities that run the gamut of the risk spectrum, there is an emphasis on managers that target properties on the higher end of that spectrum.
In Asia, meanwhile, the money that Aberdeen has raised has yet to be deployed. “We are permitted to put the money to work and continue to screen the market for opportunities, but nothing is close at this stage,” Lekander said. When it does get deployed, however, Aberdeen’s investors can expect their capital to be invested with underlying managers focused on the more mature markets of Asia, including Japan, Australia, Hong Kong and Singapore.
Start-up platforms also could be included in the mix, but not those that employ high degrees of leverage. “We’re low geared, typically looking at funds that are between 40 percent and 75 percent on a loan-to-value basis,” Lekander said. “Occasionally, if there are other reasons for the gearing, such as currency hedging, we might go slightly higher.”
Not counting co-investment capital, Aberdeen Asia Fund of Funds III is expected to attract $400 million in commitments from investors, although the fund of funds has been assigned a hard cap of $600 million. Fundraising is due to continue for roughly another year, after which the vehicle is expected to embark on a three-year investment period, similar to other funds of funds in the real estate asset class. Targeted returns for the 10-year vehicle are between 13 percent and 17 percent.