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TRS commits $100m to AEW Asia fund

The Texas Teacher Retirement System has committed almost $800 million to various AEW funds and holding companies to date.

The Texas Teacher Retirement System (TRS) has made yet another follow-on commitment to AEW Global, this time to the Boston-based firm’s second Asia fund, according to a report from the pension.

At its March meeting, TRS wrote a $100 million check for AEW Value Investors Asia II, a value-added fund launched in 2013 with a $500 million target. To date, TRS has invested in six AEW funds and associated holding companies for a total of $789.5 million, according to a spokeswoman. TRS’ most recent prior commitment to AEW was a £133 million (€180.5 million, $194.5 million) investment last December in an AEW Global holding company that purchased a UK shopping center.

With capital from the fund, AEW plans to execute a similar strategy as it used for its predecessor vehicle, investing in office, retail and residential assets in Asia gateway cities. The firm will focus specifically on Hong Kong, Singapore, Taipei, Seoul and Shanghai, according to meeting materials from California State Teachers’ Retirement System, which allocated $100 million to AEW Value Investors Asia II in the fourth quarter of 2014. AEW held a first close for the fund in January 2015 on $260 million and a second close in February on $330 million, according to filings with the US Securities and Exchange Commission. As of the end of the first quarter of 2015, CalSTRS’ investment in the fund was generating a -7.8 percent net internal rate of return, according to the pension plan’s first quarter real estate performance report.

In July 2013, PERE reported that the AEW’s first Asia-focused fund was fully-exited, with a net internal rate of return north of 13 percent and an equity multiple of 1.42x. The $558 million vehicle was raised as the global financial crisis took hold in 2008. In all, the fund held 11 investments that were acquired using leverage at an average loan to value ratio of 50 percent.

Investors in the first fund included large European institutions such as The Third Swedish National Pension Fund and Finnish insurance company Ilmarinen Mutual Pension Insurance, according to PERE Research & Analytics. Fund I had no Asian investors, although PERE reported in 2013 that AEW was understood to be targeting some Asian investors for Fund II.