Private real estate investors headquartered in Asia look set to be very active in the asset class over the next 12 months, according to an investor survey by Preqin, a leading alternative asset data and intelligence analysis firm.
According to Preqin, over two-thirds of investors based in Asia have indicated that they are likely to make commitments in 2014, following a year when 56% of Asia-based investors committed to new funds.
Preqin’s survey of 430 institutional investors across alternative assets in December 2013 found that only a quarter of Europe-based investors active in private real estate indicated that they are likely to make new commitments to the asset class in 2014, compared to 34% of North America-based investors and 70% of Asia-based investors.
Preqin warns that overall, real assets fundraising may not see as large an increase, with 24% of real estate investors expecting to commit less capital in 2014 than in 2013, and 31% of investors in infrastructure looking to put less capital to work, although a similar proportion do anticipate investing more in 2014.
From the report:
Despite 2013 seeing private real estate fundraising reach a five-year high, with $77 billion raised from 168 funds reaching a final close, only 41% of investors surveyed in December 2013 committed to private real estate funds in the previous 12 months. This trend looks likely to continue in the year ahead, with many investors remaining cautious of committing capital to private real estate funds in 2014, as only 35% of investors surveyed intend to make new commitments over the next 12 months.
Activity in 2014 is likely to vary significantly according to institution size, with 59% of investors with $10bn or more in total assets under management expecting to make new commitments compared to just 26% of investors with less than $10bn in assets. Additionally, many active investors intend to commit to multiple funds in 2014, with 65% of investors planning to place capital in three or more private real estate funds. As such, despite only relatively few investors intending to make new commitments to the asset class in the year ahead, those that do commit are likely to place sizeable amounts of capital in multiple funds. However, with 31% of investors planning to increase their allocations to the asset class both in the next 12 months and the longer term, there is the potential for significant amounts of capital to flow into private real estate in the coming months.
A preference for higher risk/return profile strategies is particularly prevalent among investors in the year ahead, with value added and opportunistic funds targeted by 49% and 45% of active investors respectively; comparatively, appetite for core funds has declined from 52% targeting the strategy in December 2012 to 43% in December 2013. There are also likely to be considerable regional variations, with 70% of Asia-based investors likely to make new commitments, compared to just 34% and 25% of North America- and Europe-based investors respectively. Institutions are also likely to target domestic opportunities in 2014, with 73%, 59% and 60% of North America-, Europe- and Asia-based investors planning to invest domestically respectively.
To read the full Preqin report, click here.