Swip to invest in eastern promise

Published on Wednesday 5 March 2008 20:38

EDINBURGH-based Scottish Widows Investment Partnership (Swip) is to launch a commercial property fund in China over the next two years .

Fund management group Swip already has about 7 billion of its 98bn assets invested in UK and overseas property but has never had a presence in the Far East property market.

The drive into China is being led by Malcolm Naish, below right, who joined Swip as head of property last year from DTZ Investment Management.

Swip's plans are at an early stage, with the company talking to potential partners, including developers and investors who have a knowledge of the local market in China.

But after a trip to the country late last year, the firm expects to launch a fund for institutional investors – such as large pensions funds – over the next two years.

Naish told The Scotsman: "I suspect we'll invest in more developed markets on the Eastern seaboard of China, such as Shanghai, but that depends on which partners we find.

"When you go into a market such as China you need access to the right people who understand how the system works..

"We're currently assessing what cycle in the market China is at.

"We're more likely to launch institutional funds in the first instance, but we're open minded about retail funds." He explained there are a number of reasons for targeting China, including the fact the commercial property market is becoming increasingly global.

Most UK commercial property funds have struggled as a result of the effect of the credit crunch causing a lack of liquidity.

After years of double digit returns, most UK commercial property funds are now in the negative, while more globally diversified investments are performing better.

Naish added: "Some property fund investors took fright last year but those who have ridden through this storm should see sensible returns over the longer term.

"The current downturn looks different from those in the mid 1970s and 1989-90. The economy is more stable, for example." Other reasons for Swip being drawn to China include its growing and urbanising population and high GDP, 9 per cent per annum between 1995 and 2005, compared with 2.7 per cent in the UK.

Naish said: "Another question is, do we look at investing in other markets which have shown good growth, such as India, Taiwan, South Korea and Vietnam?"

Not many UK fund managers have commercial property funds investing in China.

Tony Ahearne of research company Moneyspider.com said one of the few that comes to mind is First State Asian Property.