GLOBAL - Chinese investors are targeting real estate funds as they switch their attention from domestic urban residential investments to strategic assets in advanced economies.   According to data released by US research firm Real Capital Analytics (RCA), the focus on liquid and low-risk securities and strategic commodity investments has given way to arm's-length investment "typically in established [property] firms with solid track records".   Driving the trend are developments that are having a drag on the domestic real estate market, including the Chinese government efforts to tighten regulation of land sales and credit for new developments - previously a target for domestic investors.    Attracted by potentially higher yields overseas, government-backed investors are limiting direct acquisitions in favour of fund investments.   The report claimed Chinese buyers had been restrained in their direct overseas investments in order to avoid a protectionist spotlight in some markets on foreign real estate acquisitions.   Direct investment activity has been limited to a handful of properties over the past year, with most involving private players in neighbouring markets, according to the report's authors. In contrast, state-controlled investors "with their deeper pockets" were looking to the US and London - but not via direct investment.   "Unlike direct property buyers, Chinese developers typically venture overseas with motives relating to China's strategic trade interests," said the report. It cited recent negotiations for state-controlled shipping company Cosco to expand the port of Naples, ongoing negotiations to build an airfield outside Rome for Asian cargo, and a recent agreement between the state-owned centre of trade and investment management to build the 13-unit Greenwood business park outside Moscow.   The most aggressive investor in recent months has been the China investment Corporation (CIC), a sovereign wealth fund, which has committed $800m (€602m) to Morgan Stanley's Real Estate Fund VII Global, and an additional US$1bn to US and Canadian vehicles.   CIC's real estate equity investments include a 19% stake in Morgan Stanley's UK real estate subsidiary Songbird Estates and a 7.9% stake in the recapitalisation of bankrupt US firm General Growth Properties. GGP has been a recent target of US pension schemes, including the Teacher Retirement System of Texas, which in September invested $500m in the firm.    In a separate report on the US market published last week, RCA identified in investment shift in the US market from private investors to institutions and real estate investment trusts (REITs). According to the report, private buyers remain active in the market overall but REITs dominated third-quarter investment in the commercial sector.   However, the report also noted that REITs were not necessarily the most aggressive bidders, investing across US markets and suburban submarkets. In contrast, cross-border investors focused on core office assets in major cities.

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