KBC Asset Management has launched a $1bn (£520m) real estate fund in Japan to take advantage of future growth prospects in the world’s second largest real estate market.

The seven-year closed-ended fund, will be domiciled in Dublin, and will invest principally in the office, retail and industrial markets in Tokyo, Fukuoka, Osaka, and other major Japanese cities.

Local joint venture established

It will have a minimum investment of €250,000 (£195,500), or its Japanese or US currency equivalent, and will target an internal rate of return of 15% over a five to 10-year investment period. KBC has established a joint venture with local Japanese property team MAC Investment Management

It said that its targets for Japan were supported by the country’s strong structural expansion and trade development in the region, including: deregulatory activity encouraging inward investment in the region; a return to positive GDP Growth forecast at 2% per year for the next three years; shortage of modern space against rising demand; and an office vacancy rates in Tokyo’s premier areas of below 1%.

Seed portfolio identified

KBC has already identified a seed portfolio of around 25 properties which it said will be bought during the first three years of the fund’s life. It said it will adopt a core investment strategy similar to that of its Lothbury fund which has outperformed the IPD Property Pooled Fund Indices Balanced Property Unit Trust Index over the past one, three and five years.

Asian gateway

Simon Radford, chief executive of KBC Asset Management UK, said: ‘This fund offers a gateway to investing in the Asian property market. The fundamentals are strong and there is upside potential for commercial land prices and rental increases.

‘Property market performance has a historically low correlation with European and North American markets and so is a good diversifier for property investors looking for a global portfolio’