Japanese institutional investors consists several potential group of investors in global real estate market. Let’s take a look at the characteristics of the various types of Japanese investors.
March 28th, 2016
Pivotal time for Japanese investors is coming. It is expected that Japanese institutional investors will be a significant group of investors in global real estate market in near future due to public pensions’ decision to invest in overseas real estate and infrastructure, low return in domestic due to negative interest rates and low growth.
Before Japan’s fiscal year starting this April 2016, Asterisk will summaries the variety of Japanese institutional investors, which have great potential for overseas real estate and infrastructure investment.
There are 2 categories of investors for overseas real asset investment by new investors and existing/re-entrant investors.
* This information is based on independent opinion and research done by Asterisk Realty & Placement Agency. Please be noted that number of investors is just a number of investors in the group, therefore, it doesn’t necessarily mean that it’s a number of active investors.
Existing/Re-entrant investors
Real Estate Group
Investor Category: Developers, Constructors , Real Estate Companies
No. of investors: About 20
Abstract: Actively investing in Southeast Asia to gain capital return through development. Some of advanced players have started or re-entered to developed market, such as US, UK, EU, Australia. Investment targets are diversified with commercial, residential, logistic, hotels, etc.
Existing/Re-entrant investors and New investors
1st Tier Financial Institutions
Investor Category: Industry Central Banks , Major Banks , Major Insurance Companies
No. of investors: About 10
Abstract: Each investors are very large – more than 250 billion USD AUM to 1.8 trillion USD AUM . Each of them have enough resource and platform to make a discretionary decision for global real estate investment. Core strategy is a main stream, but some investors are capable with value-add strategies.
New Investors
2nd Tier Financial Institutions
Investor Category: Regional Banks & Credit Unions, Medium Size Insurance Companies
No. of investors: 400+
Abstract: There are 105 regional banks in Japan (64 first-tier regional banks and 41 second-tier regional banks), and total AUM of all first-tier regional banks are JPY 292 trillion (2.4 trillion USD) and total AUM of all second-tier regional banks are 72 trillion JPY (600 billion USD ) by the end of November 2015. The sum of all the regional banks AUM is over 3 trillion USD – about 3 times more of the GPIF, the world’s largest public pension fund. The aim is to invest in real estate for these 2nd tier, gaining stable income for a long-term. Therefore, core strategy is in their target for investment. Although this group is not leading player for global real estate, it is estimated that 30% of capital in Japanese private REITs are from only regional banks. It is a group with a huge potential for global real estate.
Credit Unions – the group has floating fund of 76 trillion JPY, and over 42 trillion JPY is invested to bonds and other financial products. Also, its characteristics are similar to regional banks.
Special Group
Investor Category: Public Pension Funds, Mutual Aid Associations, Pension Associations
No. of investors: About 10
Abstract: Most of investors in this group have already announced, and has started real estate investment or issued RFP. The 200 billion USD pension, Chikyoren (Japan’s pension fund association for local government official) announced that the first fund manager had been selected in March 2016. As well as, the world’s largest pension fund with 1.23 trillion USD, the Government Pension Investment Fund (GPIF) is leading this special group. 4 major public pensions & mutual aids including GPIF have announced that they are allocating up to 5% of AUM to alternative assets (real estate, infrastructure and private equity), and real estate is expected to be a main asset in alternative.
REITs
Investor Category: Listed REITs
No. of investors: About 50
Abstract: After change in regulation to enable listed J-REIT to invest overseas real estate in 2008, Japanese government have been encouraging Japanese listed REITs to include overseas portfolios for a long time. Even though large transaction has not been made, low return and demand surpassing domestic market environments pressures listed J-REITs for overseas real estate. Some J-REITs has already started investment and expecting few transactions in 2016. Asterisk estimate that some of advancing REITs have the potential to deploy 5 – 10 % of its capital to overseas real estate. Market size of listed J-REIT is about 11.5 trillion JPY by the end of February 2016.
Large Corporate Pension Funds
No. of investors: About 10
Abstract: There are some large corporate pension funds with over 5 billion USD AUM and these groups can make their own decision for investment and portfolio allocation. In 2015, some new and large commitment to global real estate funds from large Japanese corporate pensions were seen.This group is at leading position for global real estate investment in Japanese pension funds industry. Ticket size is relatively large of 50 million USD – 100 million USD.
Corporate Pension Funds
Investor Category: Corporate Welfare Funds
No. of investors: About 300+
Abstract: Most of investors in this group tend to rely on third party’s investment advisory and gatekeepers. Ticket sizes are around 5-10 million USD.
Others
There are other potential investors such as FoFs, private REITs, leasing companies, trading companies, family offices…etc
It is also expected that domestic fund manager will be pushed to invest in international market because domestic market growth is very limited, and Japan’s real estate market cycle seems to be reaching its peak.
We estimate majority of demand from new investors are for core/core plus strategy at their first stage.
It seems that new investors are focusing first on US market, especially pension funds supported by US new FIRPTA reform, and existing and re-entrant investors are shifting to other markets such as EU/UK, Australia and Asia.
Related articles
Japan’s Regional Banks, USD 3 trillion group, are forced to invest to alternative and real estate assets globally https://japanplacementagent.com/en/article-2/japans-regional-banks-usd-2-4-trillion-group-are-forced-to-invest-to-alternative-and-real-estate-assets-globally/
Japan’s negative interest rate pushes global real estate investment by Japanese investors https://japanplacementagent.com/en/article-2/japans-negative-interest-rate-pushes-global-real-estate-investment-by-japanese-investors/
Japan Post Bank, 1.7 Trillion USD Japanese Institution Anticipated to Invest in Real Estate https://japanplacementagent.com/en/article-2/japan-post-bank-1-7-trillion-usd-japanese-institution-anticipated-to-invest-in-real-estate/
Are Japanese Insurance Companies Going To Return To The Real Estate Market? https://japanplacementagent.com/en/article-2/are-japanese-insurance-companies-going-to-return-to-the-real-estate-market/
________________________________
For further details about this newsletter and our services, please contact: Yukihiko Ito (yuki@asteriskrealty.jp) / Yokaze (yokaze@asteriskrealty.jp)
About Asterisk Realty & Placement Agency
Asterisk is a private fund placement agency for global alternative in Japan. Through our unique and extensive network of Japanese investors, we support global fund managers in accessing Japanese and Asian institutional investors (pensions, financial institutions, real estate developers, other business companies, etc.).
We provide access and strategies for overseas fund managers to bridge the gap between them and Japanese investors.
Asterisk Inc.,
3-29 Kioicho Gluckheim Suite 2003 , Chiyoda-ku , Tokyo , Japan
Telephone: 03-3263-9909
Email : info@japanplacementagent.com
Website : https://japanplacementagent.com/en/
Type II Financial Instruments Business License The Kanto finance Bureau No.2577
Real Estate License / Governor of Tokyo (2) No.89094
