Calpers commits $500m to Asia real estate fund

The largest pension fund in the US now has approximately $3 billion of its real estate assets in Asia.

The California Public Employees’ Retirement System (CalPERS) has committed $500 million investment commitment to the new real estate ARA Asia Dragon Fund.

The Fund is sponsored by ARA Asset Management, a member of the Cheung Kong Group, one of the leading real estate companies in Asia. ARA has $4.7 billion under management and publicly-traded real estate investment trusts in Hong Kong, Singapore, and Malaysia.

In addition to the $500 million commitment, CalPERS also allocated $500 million for potential co-investment opportunities with the ARA Asia Dragon Fund, which will invest in private real estate. The Fund anticipates approximately $1.5 billion in total commitments by CalPERS and other investors not including co-investment allocations. Its target annualized net return on investment is 18 percent.

ARA says the ARA Asia Dragon Fund will limit its investments in any one country to no more than 50 percent of its total commitments. No more than 25 percent of the investments in the Fund will be in China. Investments will focus on residential development projects in major cities of high urbanization and population growth, in commercial development projects, and in underperforming assets in good locations.

CalPERS currently has approximately $3 billion of its real estate investments, commitments and allocations in Asia, including this new relationship with the ARA Asia Dragon Fund. The pension system’s global real estate program has approximately $34 billion in investments, commitments and allocations, including approximately $20 billion in total market value of investments. CalPERS’ Asia real estate investments generated a one-year, after-fee return of 27.8 percent as of December 31, 2006.