CalPERS to invest $530m in Asian real estate funds
22 Aug 2012
The California Public Employees Retirement System (CalPERS) has approved commitments totalling $530m into two funds targeting Asian real estate. The larger of the two commitments is a $480m allocation to the ARA Long Term Hold fund. The other $50m is being placed into the ARA's Dragon Fund II.
Joe Dear, chief investment officer at CalPERS, said: "Income growth and urbanisation remain the key themes for growth in China. China's office and retail sectors offer stable rental income and potential for capital value growth."
The two commingled funds have different investment strategies. The Long Term Hold fund will be zeroing in on investments in high-quality office buildings in central business districts and retail malls in well-located, densely populated suburbs in the first and second-tier cities in China and Hong Kong.
The Dragon Fund II will primarily focus on retail, office and residential property investment in key cities of China, Singapore, Hong Kong and Malaysia. ARA Asset Management, a member of the Cheung Kong Group, manages both funds.
Ted Eliopoulos, senior investment officer for the CalPERS real estate programme, said: "ARA is a disciplined investor with a strong bench of senior executives and capabilities in many aspects of real estate operations in Asia.
"The team has performed well for our fund over the years."
CalPERS' first exposure to ARA Asset Management was in 2007, when it made a $500m commitment to ARA Dragon Fund I. This investment has earned the pension fund a 19.2% return for the one-year period ending 31 March 31 and an annual 8.4% return over the last three years.
The two commitments come just after the unveiling of CalPERS' recent strategy for real estate investing. According to the strategy, the pension fund aims to maintain fewer manager relationships, while rewarding managers with "proven performance" with larger commitments.
Author: Jon Peterson