PROPERTY FUNDS, often considered as the hybrid between equities and bonds, are increasingly becoming an important asset class, particularly against a backdrop of volatile equity markets and the introduction of real estate investment trusts, or reits in Asia.
Bill Cheung, director, Credit Suisse Solution Partners (Hong Kong), a unit of Credit Suisse's Private Banking division, says closed-end private equity real estate funds have been gaining popularity among high and ultra-high net worth clients in Asia.
'Many reputable institutional fund managers have invested in some of the more mature real estate markets in Asia including Australia, Japan, Singapore, Hong Kong, as well as South Korea and China,' Mr Cheung says. Minimum subscription to these is normally in the range of US$10 million and up.
From an Asian perspective Mr Cheung believes funds investing in Japan, Singapore, China, Macau and Thailand are standouts as favourable locations depending on the types of properties being developed. He believes funds that include a mix of commercial, residential, resort and hotels offer the best opportunities due to their asset diversification.
Through investing in these funds, he says clients can build a diversified real estate portfolio in markets, property sectors and risk-return strategies.
Research has shown that direct investment in real estate properties, while providing the highest long-term risk-adjusted return, has low correlation to other asset classes such as bonds and equities.