Malaysian Pension Giant Invests $660M in Euro Real Estate

(July 26, 2013) — European property continues its rise in popularity: Malaysia’s state pension fund is about to invest $660 million in German industrial property and French office space, according to media reports.

The Employees’ Provident Fund, the world’s sixth-largest pension with $160 billion in assets according to Reuters, has been expanding its foreign portfolio after domestic opportunities slumped in recent months.

Using an existing partnership with Australia’s Goodman Group Pty, the pension fund will use $330 million to launch a fund to buy seven industrial properties in the German cities of Berlin, Munich, and Frankfurt.

Another $330 million will be used to buy prime office space in Paris and capitalise on high rental yields there, a source told Reuters. New York City properties are also being actively targeted, the source said.

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Demand for industrial real estate is surging among global investors because of the relatively high yields on offer versus the bond market or offices and shops. And the push for developed world assets from emerging market buyers has also been well documented.

In May, aiCIO reported that Brazil’s largest pension funds were courting asset managers, investment banks, and private equity funds from developed nations in an effort to bolster their returns.

And in June, US teachers’ investment specialist TIAA-CREF joined forces with Henderson Global Investors to launch a new real estate investment management powerhouse with £41.5 billion in assets.

That partnership was driven by the “compelling growth opportunities in global real estate”, according to Tom Garbutt, chairman of the newly formed TIAA Henderson Global Real Estate.

There has also been an ongoing negotiation for Norway’s sovereign wealth fund, which is competing for half of the Broadgate office and property in London’s main business district, and a deal between Segro and Canada’s Public Sector Pension’s investment board.

The Employees’ Provident Fund’s deal will mark its first foray into the Eurozone, but it has already invested $858 million in the UK, including a 20% stake in the $12 billion redevelopment of London’s Battersea power station that was inaugurated by Malaysian Prime Minister Najib Razak earlier this month.

Currently, 5% of the Employees’ Provident Fund’s investments are channelled into real estate, with about 35% in equities and 55% in bonds.