Russell Investments is planning to boost its exposure to Asia real estate funds as part of an overall strategy to increase the number of unlisted property funds it invests in.
The Tacoma, Washington state-based fund of funds manager currently invests around $8 billion (€5.4 billion) of its funds in global real estate, $6 billion in listed property stocks and $2 billion in unlisted real estate.
However in an interview with Reuters, Russell’s new Asia Pacific head of property, Martin Lamb, said that figure was set to jump as clients started to diversify. Part of that diversification, he said, would result in greater exposure to Asia real estate, particularly in China and India.
Lamb added that the firm was in the process of setting up funds to invest in Asia. Each fund will typically invest in eight to 12 funds, focusing on China and India, but also countries such as Vietnam and Indonesia. He added the funds would target development projects rather than existing properties. A spokeswoman for Russell Investments confirmed the firm was seeking to increase its exposure in Asia, as well as raise new Asia funds.
“Pension funds in the West until recently had virtually zero exposure to Asia, excluding perhaps Japan, in part because there were so few vehicles in which to invest,” said Lamb, a former executive with Chinese shopping center developer Gerrity International and professional with Morgan Stanley Real Estate Funds and AIG Global Real Estate. “Asia has been a challenge, but it's been building up over time, and I think the next 10 years will be the decade of investing in Asia,” he added in the interview.
Lamb said Russell expected to more than double its investments in Asia real estate over the next three years, from about $300 million currently. “Our clients tell us they want to be in Asia property, and we go where our clients want to go,” Lamb said. “In emerging Asia you probably don't want to buy too much existing property, because the construction standards, the quality, or even the design is probably antiquated by the time they top it off,” Lamb said.