This article is from the Australian Property Journal archive
Franklin Templeton has raised $533 million for the Fiduciary International Real Estate Fund 2.
The funds were raised from 15 superannuation funds and far exceed its original target of $400 million.
FIRE Fund 2 invests in direct private real estate managers and does not invest in listed property securities.
Six underlying investments for Fire Fund 2 have already been sourced and a number of additional investment opportunities in several targeted markets are being reviewed.
Fiduciary Global Advisors’ managing director Jack Foster said the structure appealed to investors because private equity real estate is an efficient way for investors to access direct global property investments.
He added that the structure allows investors to take advantage of the low correlation between property and other asset classes, without some of the headaches that plagued global property investors in the past.
“Investors previously risked being over-exposed to one market or sector.
“Property is still an asset class which depends on local knowledge and our funds invest in local expertise across several markets,” he added.
Foster said unlike large cap equities, FIRE Fund 2 offers attractive opportunities for diversification and risk-adjusted returns.
“The fund generates returns by identifying underperforming properties in various sectors across global markets.
“Unlike large cap equities, which display a high correlation across different markets, property still has a very low correlation between countries. It pays to be diversified,” he added.
Franklin Templeton Investments Australia’s managing director Maria Wilton said global real estate is sometimes considered an alternative investment strategy, but increasingly is coming out of a more broadly defined property allocation that includes listed and unlisted, and Australian and global sectors.
“Global property is emerging as an integral part of investor portfolios.
“Investment allocations to global property will increase due to increasingly challenging valuations in the Australian real estate market. Australians are sophisticated property investors and have been waiting for the right products to go global,” she added.
Last month, John Foster said real estate is the largest asset class in the world – competing with stocks and bonds for investment capital and will continue to offer great returns to investors, at the Australian Direct Property Industry Association 7th annual conference.
“Globally pension funds are now showing a strong demand for the low risk, steady returns associated with property investment. We are noticing a trend towards bundling real estate with alternative assets, including hedge funds and private equity. For example, the under funded German pension funds are now strongly investing into alternatives.
“The Global Real Estate universe has expanded to $US15 trillion which includes all commercial Real Estate (corporate owned but not government owned assets). Private and Public institutional investors own assets worth $US6.1 trillion and Public Equity has captured $US565 billion of assets in global real estate,” he added.
Capital flows to US Real Estate have increased from $US66 billion in 2001 to $US250 in 2005.
Foster said key drivers for this growth have been the non listed real estate funds, which have increased in number from 223 (gross asset value $US87.03) in 2001 to 304 (gross asset values $US120.82) in 2004.
“In USA, capitalisation rates have shown a downwards trend for all sectors-office, office suburb, retail, apartment and industrial. Yields continue to be strong and stable. In the next two-five years, capitalisation rates will level off,” he added.
Foster said baby and echo boomers will lead US Apartment demand in next five years.
By Nelson Yap
