On the heels of its most successful year since the onset of the global financial crisis, private equity real estate fundraising for the Asia-Pacific region seems to have hit a bump.
The first quarter of 2014 turned out to be the least successful fundraising quarter for Asia-focused property funds since the first quarter of 2012, at least according to PERE’s Research & Analytics division. Indeed, compared to the $2.4 billion raised in the first quarter of last year and the noteworthy $5.3 billion raised in the fourth quarter, Asia-focused funds collected just $1.7 billion this past quarter.
Fundraising successes elsewhere could be drawing dollars away from Asia funds. On a global scale, last quarter was in fact private real estate’s most successful first quarter for fundraising since the global financial crisis, but the figures were skewed by a small number of particularly large funds outside Asia, such as The Blackstone Group’s €5.1 billion Blackstone Real Estate Partners Europe IV and Pacific Investment Management’s $5.5 billion PIMCO BRAVO Fund II.
“It’s a function of having a lot of funds back in the US and Europe,” said Edwin Chan, regional head of Asia at placement agent Probitas Partners. He added that it can be difficult even for US funds to get the attention of domestic investors, pushing Asian funds even further down the list. According to PERE figures, there currently are about 650 funds seeking capital at the moment.
“Lots of investors in Europe that had been light in their allocations to that region are now catching up,” one Hong Kong-based firm told PERE. “I know of people today looking into Spanish or Italian strategies when two years ago they wouldn’t have dared.” He thought European investors would be particularly hard to attract given their preference for local markets.
At the same time, Trevor Cooke, head of Asia real estate at UBS Global Asset Management, said a slowdown in fundraising doesn’t necessarily mean a slowdown in allocation of capital. While Europe and the US appear to be more attractive from a fund perspective, investors have not pulled out of the Asia-Pacific region altogether. Instead, he has found many investors preferring direct or joint venture strategies.
In such an environment, Chan is convinced the best way to get investors’ attention is to show realizations in the portfolio. “Investors want to see money coming back, so it’s down to the manager,” he said. “They need to deliver.”