Make a call: assessing capital calls velocity for closed end Asia Pacific non-listed real estate funds

Pages617-625
Published date14 May 2020
Date14 May 2020
DOIhttps://doi.org/10.1108/JPIF-03-2020-0027
AuthorArvydas Jadevicius
Subject MatterProperty management & built environment,Real estate & property,Property valuation & finance
Make a call: assessing capital calls
velocity for closed end Asia Pacific
non-listed real estate funds
Arvydas Jadevicius
Independent Researcher, Amsterdam, The Netherlands
Abstract
Purpose The study examines Asia Pacific (APAC) non-listed non-core real estate fundscapital calls
(investor equity drawdowns) sequence for varying vehicle strategies.
Design/methodology/approach Analysis starts with a cursory data interpretation that extracts a typical
investorsequity drawdowns schedule. Thousands of simulations are then computed for each vehicle strategy
for each year to further interpretation.
Findings Data and methodological limitations notwithstanding, overall estimates suggest that funds exhibit
a contrasting capital calls sequence. As a group, APAC non-core non-listed real estate funds call circa 76.3% of
investorscommitted capital during the first four years of the fund life. Single sector, single country and value
added vehicles have a greater capital calls velocity compared to their multi sector, multi country and
opportunity peers. However, the two fund groups exhibit a notable standard deviation heterogeneity of
drawdowns.
Practical implications Investors should therefore budget accordingly when choosing either of vehicle
strategies to invest in.
Originality/value The study adds additional evidence on the topic of capital calls velocity. Results should
assist LPs with their non-listed APAC real estate funds investment programme further.
Keywords Asia pacific, Real estate, Velocity, Funds, Capital calls, Non-listed
Paper type Conceptual paper
Introduction
As once the great baseball-playing philosopher Yogi Berra observed, it is tough to make
predictions, especially about the future(The Economist, 2007). For economists and finance
professionals this remark may seem all but true. Naysayers comment that economic forecasts
are often wrong and hence, given their inaccuracy, one should refrain from forecasting.
However, as most may agree, forecasts (in finance in particular) are inescapable. Whereas
uncertainty severely afflicts investments, any forecast is considered to be better than no
forecast in judging the future market direction, as well as investment gains and losses.
Investors with non-listed real estate funds allocations have a first had experience of the need
of forecasts.
Non-listed (private equity) real estate investments are usually organised in funds that are
managed by partnerships. The partnership usually contains two parties the general partner
(referred as GP) and limited partner (LP). The GP is an investment management company
that organises the partnership. It is referred as general partner because it is responsible for
running the partnership, including raising capital, finding suitable assets and making
operational business decisions. Limited partners on the other hand are institutional investors
who contribute capital to the partnership. Investors are LPs because they are not responsible
for selection of assets and day to day management of the partnership (CFA, 2014).
Asia Pacific
non-listed real
estate funds
617
The author would like to thank anonymous reviewer, Robert Lie, Amelie Delaunay and ANREV
Research Committee for their editorial that greatly improved this manuscript. Disclaimer: This
manuscript was prepared by the author in his personal capacity. All views and opinions expressed in
this manuscript are those of the author and should not be regarded as representing the views or opinions
of institution he represents.
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1463-578X.htm
Received 14 March 2020
Revised 5 April 2020
Accepted 6 April 2020
Journal of Property Investment &
Finance
Vol. 38 No. 6, 2020
pp. 617-625
© Emerald Publishing Limited
1463-578X
DOI 10.1108/JPIF-03-2020-0027

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