The rapidly evolving nature of real estate investment markets in Asia underscores the importance of pan-Asia real estate investment funds, according to a senior executive at New York-based Franklin Templeton Real Estate Advisors.
Speaking to PERE following the launch of Franklin Templeton’s second Asia fund of funds, the Franklin Templeton Asia Real Estate Fund II, Uren acknowledged the more prominent position country- and sector-specific real estate funds have in the market. But he said there must also be room for pan-Asia vehicles.
He said the firm’s new fund, which is expected to have approximately $300 million in equity at final closing, would happily invest in both fund models.
“We are primarily going for country- and sector-specific vehicles. We’ve always tended to do that, but I won’t rule out pan-Asia vehicles as well,” Uren said, “If they are best in class, we will look at them.”
“In my opinion, pan-continental vehicles give the manager the opportunistic flexibility to choose the few countries that will do well over a, say, three-year period,” he added. “Most of these funds start out as pan-Asia, but the reality is they end up focussing on two to three countries, anyway.”
“It is important to remember that Asia changes all the time and that it has so many different countries.”
Pan-continental funds came in for some criticism during 2009 over their perceived lack of focus. But Uren counters: “Some very specific funds, both country- and sector-focused, blew up also.”
“Just because some of these funds didn’t work out for some, the market tends to aggregate its concerns onto everyone else. Is that fair? Maybe not.”
The Franklin Templeton Asia Real Estate Fund II was launched earlier this month. Its predecessor, which closed on $383 million of equity in early 2009, is nearly fully committed having allocated its resources to 10 funds already. Uren says the fund of funds will commit equity to four more vehicles before the end of the year. To read more about the fund launch, see the April issue of PERE.