Sovereign wealth funds (SWF) are becoming much more active on global real estate markets, and funds from Asia Pacific are especially prominent, according to research by the Sovereign Wealth Center. Asian funds accounted for $6.4 billion in real estate investment in 2014, up 45% y-o-y, and 30% of global investment by SWFs in 2013.
Real Estate Investments from Asian SWF in 2014 (Deals and Total Investment)
Source: Sovereign Wealth Center, 2015
Prominent sovereign wealth funds from the region, such as Singapore’s Temasek and GIC, Hong Kong’s Monetary Authority, and China’s State Administration of Foreign Exchange, are leading the Asian charge into real estate assets.
Asia-Pacific remains the main target for Asia SWFs, accounting for $2.8 billion in investment in 2014, with other markets receiving less, but still significant inflows. Europe saw $2.2 billion in investment in 2014, North America had $843 million and Central Asia received $306 million.
Gateway cities, such as New York, London, Paris, Tokyo and Hong Kong have significantly benefited from SWF investment. A stand-out deal from 2014 includes the $1.6 billion spent on Pacific Century Place in Toyko by Singapore’s GIC.
Partly, this represents evolution in SWF’s investment strategies. Previously, they have favoured safer investments in banks and infrastructure projects but are increasingly looking to property assets as a source of stable income streams and price security, particularly in fast-urbanising cities in Asia that will benefit from the region’s strong longer-term growth prospects.
This outpouring also reflects growing pressure on the funds to generate value, particularly in a low-interest rate environment. Many of these funds manage pensions for Asia’s rapidly ageing populations and in some cases, such as China, are actively looking overseas as investment options weaken at home.