AXA Investment Managers – Real Assets’ acquisition of Eureka Funds Management last month took its assets under management in Asia from around €550 million to more than A$5 billion ($3.8 billion; €3.4 billion).
Eureka, a Sydney-based independent real estate fund and investment manager founded in 2004 by Bob Kelly, Kumar Kalyanakumar, Quentin Shaw, Niall McCarthy and Rod Cowdroy, focuses predominantly on core assets and has made investments in the office, retail, industrial, hotel and residential sectors.
The move by AXA IM is part of a wider Asia expansion plan for the €66 billion investment manager, which now has a team in Australia, along with existing offices in South Korea, Japan and Singapore, where it is headquartered.
“I’d say we have two legs in a four-legged table: Japan and Australia,” said Frank Khoo, global head of Asia at AXA IM – Real Assets.
Khoo joined in 2008 and set a strategy of growing a funds management business, primarily in Japan and Australia.
For instance, AXA IM launched the Tokyo Office Property Fund (TOP) in August 2012, a closed-ended vehicle that would be invested in mid-sized office properties in the Japanese capital. The fund’s ¥20 billion ($192 million; €170 million) portfolio was invested across five assets and liquidated last month. TOP delivered an internal rate of return of 25 percent, far exceeding the firm’s original return expectations of around 10 percent, according to a statement.
Yet, while a platform was established in Japan, until now establishing a meaningful presence in the rest of Asia had proved more challenging. Even in Australia, AXA IM previously had just a single holding, which it acquired back in September 2013 with Eureka for A$168 million.
“The next destination for us will be China. So far we have not deployed capital in China, only raised money from Chinese investors who would like to invest outbound, but the next step for us is to look at how we can get into the Chinese market,” said Khoo.
He said that to gain access to the market, AXA is open to either growing the platform organically, finding a local partner or acquiring a platform. “We need to identify which asset class we want to be in and once we identify that, then the next step is identifying how we do it, be it by ourselves, with a partner or acquiring someone with existing expertise,” he said.
However, Khoo added that while it is still early days in the expansion, he would look to try to make inroads next year. “I think from a timing perspective, it’s the right time to go into China now. The market is slowing and capital is now a scarce commodity for real estate, so the opportunity is more open to us than it was before.”
And now that more legs are being added to the table, Khoo has his sights set on regional – rather than just country-focused – investing.
“When we had just the two investment platforms, Australia and Japan, we could only really look at opportunities within these regions. Now that we have a presence through offices in Japan, Australia, as well as in Singapore and South Korea, I think that we can start to do things on a more pan-Asian basis,” said Khoo. “That’s one of the things we’ll start to look at. How can we leverage where we are in various countries to do something pan-Asia? We are broadening our scope and not looking at things just on a country basis.”
AXA Investment Managers – Real Assets’ €66 billion in assets are split into €50.4 billion in direct property and infrastructure and €12.6 billion in real asset finance, as of end of June 2016. The firm has around 600 people working in 14 offices across 24 countries.