“We are starting to invest again in Asia,” rang out more than once at the 2009 Editorial Advisory Board meeting of The Institutional Real Estate Letter – Asia Pacific, signaling cautious optimism that the specter of the global financial crisis was lifting and that recovery — at least in Asia — was on the horizon. But the investors, advisers, consultants and fund of funds managers in attendance still face many challenges with implementing sound strategies in a turbulent investment climate, as well as navigating their relationships with one another, which have been sorely tested by the fallout from and uncertainty generated by the economic downturn.
From the Current Issue
In times of volatility there is a flight to quality — investing in what you know. When Lehman Bros. filed for Chapter 11 bankruptcy protection in September 2008, the U.S. dollar initially soared in value against a basket of currencies. However, as stability returned, volatility reduced and the dollar retreated. With the equity markets, at the time of writing, higher by up to 57 percent since their nadir at the beginning of March 2009, many investors are now feeling that the worst is over and are looking to invest in currencies that are higher yielding than the U.S. dollar.
Private equity real estate funds formed in China under Chinese law and denominated in the domestic currency, the renminbi (RMB), have captured the attention of international real estate investors and fund managers desiring to build investment platforms in China. These RMB funds are already a prominent feature of China’s developing domestic private equity industry. Recently the prospect of foreign involvement in RMB funds, either in the form of fund management or direct investment into the fund, has become increasingly possible, spurred on by changing legislative policies and programs.
A lot has been written recently about the economic recovery and the continued “great leap forward” of China’s GDP. Although I am impressed with the numbers and with the speed of the recovery, I take this with a grain of salt, given the huge government stimulus package and inconsistent reporting of GDP figures.