In an era of economic uncertainty and shifting global markets, institutional investors and ultra-high-net-worth individuals ( UHNWIs ) are increasingly seeking investment opportunities that offer stability, diversification, and long-term growth potential.

M&G's investment strategy for the Asia living sector stands out as a compelling option for UHNWIs although, David Askham, director of portfolio management, Asia living, at M&G Real Estate, says it is specificcally targeted towards institutional investors.

The Luxembourg-based SICAV open-ended core/core-plus fund targets the residential and living real estate markets across key Asian markets, positioning itself as an ideal vehicle for sophisticated investors looking to allocate capital intelligently.

The Asia living sector, as defined in M&G’s strategy, is a broad but distinct real estate segment that prioritizes residential and lifestyle-driven properties with a focus on stability, diversification, and ESG alignment.

Its subsectors include: residential real estate, covering multi-family housing; serviced residences, including fully furnished apartments that provide hotel-like amenities and services for short or long-term stays; senior living, which focuses on housing options for older adults; and student accommodation, which invests in Australian student housing.

Unlike commercial, industrial, and hospitality sectors, the Asia living sector benefits from consistent housing demand, lower volatility, and flexible investment strategies that cater to evolving demographic and urban trends.

Focus on diversification

“For institutional investors and UHNWIs, the sector’s resilience, sustainable focus, and ability to deliver attractive risk-adjusted returns make it a standout choice in the broader real estate landscape,” Askham tells The Asset in an interview.

One of the primary attractions for investors is the strategy’s focus on diversification, which helps balance risk while pursuing attractive returns.

The fund spreads investments across geographies, sectors, and market maturities, ranging from mature markets like Japan to growth-oriented ones such as Australia, Singapore, and South Korea.

“In Japan, the focus is on multifamily assets with strong liquidity and leverage opportunities. Australia offers exposure to build-to-rent, purpose-built student accommodation, and senior living. Singapore targets serviced apartments aligned with government initiatives, while South Korea combines stabilized asset acquisitions with the development of next-generation products. This multi-layered approach minimizes exposure to any single market's volatility,” Askham says.

An analysis by The Asset, based on M&G literature and publicly available information, indicates that the Asia living strategy is not unique: the underlying investment thesis – based on demographic-driven demand for living assets, under-supply, and resilient cashflow – is now mainstream for many Asia-Pacific managers such as Hines, PGIM, AEW,  and Nuveen, which are also investing heavily in living sub-sectors and have established track records and scale.

Unique features

From the investor’s perspective, however, M&G’s strategy has unique features:

• Its feature as a private fund packaged as an open-ended SICAV with institutional governance makes it attractive for investors who want institutional execution but private-investor access.
• It has an explicit multi-subsector living mandate with a disciplined ESG certification playbook across markets, which can reduce transition/obsolescence risk if executed well.
• It acts as an allocation to forward funding and development while maintaining a core/core-plus orientation. That allocation is a clear differentiator relative to pure stabilized-asset core funds.

Particularly for UHNWIs, who often manage vast portfolios, such diversification is crucial as it optimizes risk-return profiles by blending stable, income-generating assets with those poised for growth, aiming for long-term returns of over 8% across a 1-year horizon and 10-12% over five years.

The build-to-core model, with 20% allocated to development and another 20% to forward funding, allows investors to capture yield premiums without bearing excessive construction risks, focusing instead on manageable leasing challenges in high-occupancy environments ( typically 95% or more ).

Stable sector

UHNWIs prioritize investments that align with their long-term objectives, such as wealth preservation and sustainable growth. M&G's strategy excels in this area by leveraging the inherent stability of the residential sector, says Askham.

Residential real estate in Asia benefits from low volatility, driven by enduring demand factors like demographics, urbanization, and land constraints. Post-Covid trends, including urban migration for economic opportunities and suburban preferences for work-life balance, further bolster this resilience, he adds.

The fund capitalizes on these trends by targeting assets near transport hubs and mixed-use developments, ensuring consistent rental income and capital appreciation.

With a target portfolio size of US$1.5 billion, the fund achieves scale for optimal diversification, with investment ticket sizes varying from US$20-25 million in smaller multifamily deals to A$200-250 million ( US$133-166 million ) in larger build-to-rent projects, according to Askham.

This scalability suits UHNWIs, who can commit a minimum investment of US$5 million, with flexibility offered for the right investor, while benefiting from M&G's institutional-grade execution.

Ethical considerations

Also, the strategy takes into account UHNWIs who demand adherence to environmental, social, and governance ( ESG ) principles without compromising performance. M&G's approach aligns with Europe's SFDR Article 8, emphasizing decarbonization, energy efficiency, and social impact through community-focused housing.

The fund pursues certifications like GRESB globally, CASB in Japan, Green Star in Australia, and Seoul City ratings in South Korea. It addresses embodied carbon in new developments and uses tools like CRREM ( Carbon Risk Real Estate Monitor ) standards to mitigate obsolescence risks, particularly in younger portfolios ( e.g., buildings from 2019 onwards ).

For UHNWIs, this ESG integration not only satisfies ethical considerations but also enhances long-term value. By improving existing assets' sustainability and developing new ESG-compliant ones, the strategy positions itself against regulatory shifts and market preferences for green investments. This forward-thinking stance resonates with global UHNWIs who view sustainability as a key driver of resilient returns, Askham says.