LaSalle Investment Management has grown its continental European core real estate fund to €2.5bn and has observed increasing interest from Japanese investors.
Over the past 12 months, the open-ended LaSalle Encore+ has increased in size by almost 50%, marking the highest 12-month period of inflows since its inception in 2006. LaSalle assumed full control of the vehicle in November 2018, having previously co-managed it with Aviva Investors.
David Ironside, managing director and fund manager of LaSalle Encore+, told IPE Real Assets that, although 90% of the capital was European, the fund had recently begun to attract growing interest from Japanese and Australian investors.
“By far the fastest-growing national investor group is from Japan,” he said.
Speaking in Melbourne, he said: “Japanese investors have very much woken up to Europe, and they understand the market quite well. There are a lot of similarities between Europe and Japan.”
Ironside said Japanese pension funds were by far “the biggest investors”, followed by banks and insurance companies.
“It is not necessarily in huge amounts, but Japanese investors approach things in a professional manner. Often they will invest a small amount to begin with and, when they see things go well, they invest more thereafter.
“They are professional in their approach and diligent in how they look at things.”
Ironside said Japanese investors also wanted to make sure all governance issues were regulated as they should be.
“We expect investors from Australia to make up 10% of the fund’s investor base over the next three years,” he added.
But in terms of potential, because of their much larger pool of capital, Japanese investors would remain significant, said Ironside, who described the outflow from Japan as “a slowly flowing stream”.
Asked if the elevated level of interest in the fund was sustainable, he said: “It will continue for a while at a high level because interest is increasing in terms of diversity of investors, both geographically and in the types of investors.
“The European market is of a similar size to the US market, but the open-ended funds in Europe are much smaller.”
Ironside said investors saw open-ended funds as a good way to hold real estate over the long term because it produced good returns and provided liquidity.
“You can redeem your units, especially in Europe and the UK, and there is also an active secondary market for units.”
