Last month, the London-headquartered global real estate investment manager Forum Partners told PERE it had scrapped plans to launch its fourth opportunistic Asia fund.
Forum Asia Realty Income Partners IV was never officially brought to market, but the groundwork for the vehicle had started last year and the firm had plans of raising around $500 million to invest in mezzanine debt investments.
Instead, the firm will now be making investments on a deal-by-deal basis via the Global Investment Vehicle, a €200 million co-investment platform backed by its own balance sheet, and seed capital from Groupe La Française Asset Management, a French asset manager and 19 percent institutional shareholder in Forum Partners.
In another marked change in investment strategy, the firm also said it will no longer be actively seeking investments in standalone commercial assets like the Grade B property in Osaka it acquired for $25 million last year on behalf of the $375 million Forum Asia Realty Income Partners III. It will now focus on acquiring interests in real estate operating platforms via GIV and also look to raise third-party institutional capital on a deal-by-deal basis.
Forum’s decision to abandon commingled funds and standalone commercial assets for now is not limited to Asia, but rather a revised investment approach it has adopted on a global scale. The firm also runs an opportunistic fund series in Europe, of which the latest was the Forum European Realty Income IV launched with a $479.1 million target, according to PERE research. The fund was closed on $67 million in July 2014.
In an exclusive interview with PERE, Russell Platt, chief executive of Forum, said the opportunities for value creation are currently far more compelling in co-investments than funds. “Some time ago I was asked, ‘Are you an investor or a fund manager?’ That made me wonder if we had lost our way and become fund managers, and were no longer investors? The implication of that question was concerning because if you are a fund manager you are reliant on asset management,” he said. “With the GIV, what we have is the ability to focus on a small number of deals. You don’t really need to have a large bulk of AUM to run a very good investment shop. At the end of the day, it is all about excellence in your investment results.”
“If you are building what we are – great investment platforms in partnership with management teams – you can make good money if you have the ability to bring in co-investment partners and create deal-by-deal promotes and economies. The message we are spreading is that we are not fund managers. We are investors.”
Mid-teen returns are being targeted from the investments made via the GIV. In contrast, the expected opportunistic returns for the now-scrapped Asia Fund IV were understood to be around 18-20 percent.
Forum had a similar return target for its Asia Fund III, according to a marketing document viewed by PERE in 2012. However, a spokesperson for the Teacher Retirement System of Texas, which invested $200 million in Fund III, told PERE that the pension system’s investment in the fund was generating a 10.88 percent return as of the end of March this year.
One person familiar with Forum’s revised strategy said it was also partly prompted by changing investor preferences. “Investors these days tend to move in cycles. And right now their interest in blind-pool funds has waned significantly. There seems to be much more of a focus on controlling their own destiny,” he said.