Private Equity News & Analysis

SWFs to direct $750bn to real estate

The world’s sovereign wealth funds are expected to allocate up to 30 percent, or around $218 billion, of new investments in unlisted property funds over the next seven years, according to a report by CB Richard Ellis. It comes as Bahrain-based Investcorp launches a $1bn real estate debt vehicle with an unnamed Gulf sovereign wealth fund as an investor.

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Investments by sovereign wealth funds in the global real estate sector could reach $725 billion over the next seven years, according to a report by Richard Ellis.

Sovereign funds are expected to increase their weighting of commercial property to approximately seven percent of their total assets, the report said, representing global commercial real estate investments totaling $280 billion.

CBRE also estimated in its Global ViewPoint Sovereign Wealth Funds report, sovereign funds’ projected new investment would be distributed heavily toward direct real estate investments, with a 40 to 50 percent allocation to direct real estate – a total net investment of up to $360 billion by 2015.

However up to 30 percent is expected to be allocated to unlisted property funds, around $218 billion. A further 20 to 25 percent of the wealth would be allocated to debt investments while five to 10 percent is expected to be allocated to listed property companies.

SWFs are expected to continue to focus on core real estate product in major markets, according to CBRE, but are also expected to invest in markets such as Japan, the UK and other countries with currencies that are not held in the sovereign fund’s reserves.

The largest sovereign wealth funds by total assets include the Abu Dhabi Investment Authority followed by the Norway Government Pension Fund, Saudi Arabia’s SAMA Foreign Holdings and the Government of Singapore Investment Corporation, the report said. Also rounding out the top 10 was China’s SAFE Investment Company, the Kuwait Investment Authority, the China Investment Corporation, the Hong Kong Monetary Authority Investment Portfolio, Russia’s National Welfare Fund and Singapore’s Temasek Holdings.

The CBRE report comes as Bahrain-based Investcorp revealed it was launching a $1 billion investment vehicle to target real estate loans and commercial mortgage backed securities in the US. An unnamed sovereign wealth fund from the Gulf region committed $850 million to the vehicle, it said, with Investcorp committing $150 million to the fund.