ING to raise US$675m for fund

New fund will double its Asia-Pac private-equity investments

ING Groep NV, the largest Dutch financial company, plans to double investments in private- equity real-estate funds in the Asia-Pacific region as pension funds sell holdings to meet asset allocation targets.

ING Real Estate Select aims to raise as much as US$675 million by next year for its Asia-Pacific Property Growth Fund, its first fund of funds focused on the region. It will add to about US$500 million of Asia-Pacific investments already made on behalf of individual clients and the unit’s global fund, said Nicholas Wong, regional managing director of ING Select, which oversaw US$8 billion worldwide at the end of June.

‘A lot of the other investors who have invested in property funds need to rebalance, therefore they need to get out,’ Mr Wong said in an interview here. ‘We can pick up these stakes at a big discount. I would say throughout 2009, there will be lots of opportunities coming up.’

Private-equity real- estate funds raised more than US$100 billion globally this year, according to London-based research firm Preqin.

Morgan Stanley and Blackstone Group LP are among managers that have started private-equity real-estate funds that raise money from pensions, foundations, endowments and wealthy individuals to use over a longer period of time for investments in the property industry. Pensions and endowments are selling down fund stakes to restore target asset allocations after a decline in stock and fixed-income prices this year, Mr Wong said. These stakes are often offered in the secondary market at a 30-50 per cent discount to the funds’ June net asset values, he said.

ING Select’s new closed-end fund, which is expected to have a life of seven to 10 years, will aim to generate a 15 per cent annual internal rate of return, Mr Wong said. It will be run by Dick Popken, who previously oversaw Asian property investments for PGGM NV, manager of the second- largest Dutch retirement plan.

The fund will allocate 75-80 per cent of its assets to so-called opportunistic funds, considered the most risky because they often finance property developments, and which usually return 15-25 percent a year, Mr Wong said.

The rest of the investments will be in so-called value-added funds, which are less risky with returns ranging from 12 per cent to 17 per cent, he added.

ING Select favours investments in logistics and retail spaces in the Asia- Pacific region, Mr Wong said. In China, it sees opportunities in residential properties in smaller cities where housing prices have not surged as much as in the largest cities and supply is more limited, he added.

In the developed real estate markets in the region, such as Australia, Japan, Hong Kong and Singapore, investment opportunities will mainly come from projects and companies facing financial difficulties.

Source : Business Times - 11 Dec 2008