Aberdeen Asset Management is planning to launch a fund to invest in global real estate secondaries.
The investment manager is seeking to raise €500m for the strategy, which involves buying stakes in existing property funds. Capital raising is expected to begin early next year.
The news comes three years after Aberdeen launched a European secondaries fund with cornerstone investment from Sweden’s AP1.
Mark Wilkins, head of property multi-manager, EMEA, at Aberdeen Asset Management, told IPE Real Estate that Europe will remain the primary focus, but the new fund will also look to Asia-Pacific and the Americas.
He said secondary transactions are becoming more numerous in Asia-Pacific, while the Americas is the world’s largest market for real estate secondaries.
“We have members of our teams in Asia-Pacific and the Americas, and we have a single shared investment process globally, [so] we are able to share our wider experience of secondaries in Europe with these regions.
“We are confident we can see deals in these markets because the secondary market itself continues to expand globally.
“It is one thing to talk about individual secondary transactions, but deals become more interesting when holdings in a number of funds are sold as one portfolio.
“This is when, as a buyer, you have a better side of the deal. We see some of these deals come up in the global market, and we want to be able to access them as well.”
Wilkins believes the market for secondaries grows in times of heightened uncertainty. Political events, such as the UK referendum and the US presidential election, can influence supply in the market, he said.
Some investors react to uncertainty by selling down their holdings in real estate funds, particularly when they are seeking more liquidity. Secondaries also come onto the market as a result of the consolidation of pension funds.
Wilkins noted the consolidation of pension funds in the Netherlands and the UK, and said a manager with an increased number of underlying funds might choose to reduce both the number of investments and the number of managers.
Other factors include a proliferation of unlisted real estate funds of which a number are coming to the end of their lives.
“Investors are looking at ways to become more nimble. Traditionally in real estate, if you invest in a close-end fund, you are locked in until the manager sells the assets and returns the capital,” he said.
“Now, with secondary trading becoming more common and acceptable, some investors are opting to exit through the secondary route when they want a clean and quick exit.
Currently, five other firms, including Landmark Partners and Blackstone’s Strategic Partners, are in the market raising capital for new secondary funds.
Wilkins believes capacity will not be an issue because even though the largest funds are raising between up to US$2bn, the size drops quickly from that level.
“We believe there is room for everyone,” he said. “Our sweet spot is to focus on buying good quality real estate with durable income and effectively providing a low double digit, high-risk-adjusted return.”
