German fund to invest more in Asia

HONG KONG: German fund manager Union Investment Real Estate plans to invest up to four billion euros (US$6.21bil) in Asia over five years, hoping its drive for diversification will also give returns an extra kick.

German open-ended property funds, including those run by Union Investment, have been busy snapping up property abroad since a redemptions crisis forced them to sell many assets in their home market in 2005 and early 2006.

Union Investment opened an office in Singapore in 2006, and is keen to ramp up its investment in Asia from the current 600 million euros, according to its Asia head, Steffen Wolf.

Globally, the company has around 15 billion euros of assets under management.

“Asia is very much top of our priority list,” Wolf said in a telephone interview from Singapore. “We should be looking at between two and four billion euros over, say, five years.”

A pall was cast over Germany’s entire open-ended property funds industry in 2005 when attempts to correct inflated valuations of assets spurred thousands of investors to try to cash in investments before fund units were re-priced.

Deutsche Bank took the unprecedented step of freezing redemptions in its flagship GrundbesitzInvest fund, and funds managed by Germany’s biggest open-ended fund manager DekaBank were also hit.

But Wolf said Union Investment had seen more money flow into its funds in the last year, despite a global credit crunch that has weakened commercial property prices in several markets, including the United States and Britain.

“Investors are quite aware of our risk and return profile, and are shifting from stocks to safer alternatives – savings accounts, government bonds or property,” he said.

Union Investment’s funds, such as Unilmmo Global and Unilmmo Europa, usually give annual total returns of 46%, while its investments in Asia are giving 56%, according to Wolf.

Despite signs that the Tokyo office market is weakening, Japan tops the company’s list of favourite Asian markets, which also includes South Korea, Singapore and Malaysia.

By Reuters