China: Merrill Lynch & Co is raising a Pacific Rim real estate investment fund worth around $2.5-3 billion. The launch of the fund comes at a time when many investors are looking to Asia as a safe haven in the wake of the credit crunch set off by U.S. subprime woes, as others shop for deals in United States and Europe.
Damian Chunilal, Merrill’s head of Pacific Rim origination, said that the new fund will invest in different types of property across the Pacific Rim, including India, Australia, Japan and rest of Asia.
The fund is part of an increasing push by the largest U.S. brokerage to build up third-party funds to do principal investing, he said.
“That’s going to be a model that’s repeated in the future with different types of funds,” Chunilal said, speaking on the sidelines of the Boao Forum for Asia being held on the southern Chinese island province of Hainan.
The firm is currently raising a European real estate fund. New funds will focus on private equity and infrastructure.
Other global investment banks are also planning to launch funds for Asian property. UBS recently said it plans to launch a roughly $1 billion fund for investing in China. Morgan Stanley and global investment firm Blackstone Group which are also active in real estate in the region.
While European and U.S. property markets are waning in the wake of the global credit crunch, Asia still shows signs of strength, recording a 26% jump in direct property investment to $121 billion in 2007, according to consultant Jones Lang LaSalle.
Chunilal said that although Asian financial markets had taken a hit from global credit woes, their economies would be able to weather the storm, in part because liquidity in the banking system remained adequate.