M&G core Asia strategy closes in on US$5bn as Europeans search for yield

M&G Real Estate’s pan-Asian core strategy is close to reaching US$5bn (€4.5bn) in size, following new commitments from investors based in Finland, Switzerland, Germany and Canada.

The M&G Asia property strategy, the oldest open-ended core fund in the region, has raised US$400m in the past 12 months, according to Ng Chiang Ling, CEO of M&G Real Estate Asia.

She said newcomers to the fund included pension funds from Germany and Canada and a Swiss institution. A Swiss pension had also increased its existing investment in the fund.

Speaking at the Australian Superannuation Investment Conference, organised by the Australian Institute of Superannuation Trustees, Ng told IPE Real Assets: “European investors are in search of yield outside Europe”, as government bond yields increasingly turn negative.

By contrast, M&G’s strategy in Asia has delivered an average annual return of 8% over the past five years.

“I think that, as their own funds become bigger, [European investors] need to think about how to spread their eggs around into various baskets,” Ng said.

She said Asia offered diversification and yield against a backdrop of strong economic performance compared with the rest of the world.

“Despite noise in the media about trade tensions, 50% of goods manufactured in Asia are actually consumed in Asia,” she said.

“And between now and 2030, one of every two dollars spent in the global economy will be contributed by Asia.”

Ng said Asia’s real estate market was now a bigger slice of the global investable market, with more opportunities available to acquire core assets.

In what was its single largest deal in a decade, M&G in July last year bought Centropolis, a twin-tower office development in the heart of Seoul, at the then-record price of KRW1.1trn (€832bn).

It formed a consortium with Korean investors to acquire the asset, even though the towers had no tenants at the time.

“We have already leased 65% of the buildings,” Ng said. “We are pretty confident that the remaining space will be leased soon.”

Centropolis, she said, was the last of a string of new developments in Seoul, and there was not a lot of options for tenants looking for premium office space. The bulk of office accommodation in Seoul tended to be in secondary buildings.

Related images

  • M&G Real Estate Centrpolis

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