Prior to the Global Financial Crisis (GFC) Asian Pacific experienced a boom of real estate fund formation driven by a heady mix of liquidity, capital market fundamentals and risk/return parameters. CBRE data shows that around US$91 billion of capital was raised by 184 private real estate funds in the region between 2005 and 2008. Most funds in Asia Pacific were closed-end funds which comprise of a fixed life span. Based on the typical fund life of eight years, CBRE believes that approximately 84 funds are planned to terminate between 2013 and 2016. Peak period of expiry will be in 2015 and 2016, when approximately 50 funds with a gross asset value of about US$40 billion will expire. According to historical disposition levels since 2007, CBRE forecasts that the market will only be able to absorb around 75% of the liquidity created by closed-end funds scheduled to expire in 2015 and 2016. This paper will address the implications for fund managers under such scenario.
