BRAZIL - Pramerica Real Estate International is to target institutional investors with a closed-end Spezialfond focused on 'low-risk' residential in Brazil and Chile.

Ursula Schwarz, a spokeswoman for the Munich-based fund manager, said it was too early to set a target size for the fund.

But she said regional economic growth, combined with political stability, had encouraged demand among German institutional investors for Latin American exposure.

She cited both countries' investment-grade sovereign rating - a requirement for medium-sized pension funds to invest.

"A further demand driver is the need for diversification within real estate portfolios and the fact the region has weathered the storm of the last financial crises very well and recovered quickly," she said.

Although Brazil is the largest market in the region and Chile the most developed, she acknowledged that investment risks would need to be assessed "diligently".

"The returns should give reward for the associated risk of an emerging economy," she said.

TMW Lateinamerika Spezialfonds will tap into demand for residential from the region's growing middle class.

In Brazil, it will target São Paulo, Rio de Janeiro and other major cities.

The Chilean component of the fund will focus on areas surrounding capital Santiago.

Residential is the largest sub-sector in the two markets, with long-term demand forecasts of $300bn (€231bn) compared with $230bn for retail and $100bn for office.
At the same time, low inflation has increased lower and middle-income purchasing power.

"The political interest to provide housing space should promote a decrease of market entry barriers," Schwarz said. "This sector has the lowest implied risk."

The fund manager is also considering a Latin American fund focused on retail or industrial.

In separate news, Canada Pension Plan Investment Board (CPPIB) subsidiary Ivanhoe Cambridge has acquired an additional 49% interest in a Rio shopping centre for CAD80m (€61m) via a 50:50 joint venture with local partner Ancar Ivanhoe.

The partners already owned a combined 51% of the asset, Botafogo Praia Shopping, and 10 other shopping centres across Brazil.