Apollo is exiting its equity real estate business in Asia, but sticking by the credit strategy for the asset class. It raised an equity fund for Asian real estate in 2020 of nearly $500 million and prospects for a third equity fund were bleak.
Apollo Global Management, an asset manager with more than $630 billion AUM, has decided to pull the plug on its Asia real estate equity business. A spokesperson cited "an orderly wind down" without mentioning specifics, and the decision likely reflects internal business considerations and also difficulties navigating the Asian real estate environment. Apollo entered the Asian real estate asset class in 2009 through both credit and equity strategies. In 2020, it raised $476 million for its second Asia real estate equity fund, targeting China, India, and Southeast Asia.
There is some indication that Apollo invested heavily in China's residential sector which did not far well in 2023. This may have hurt the fund, and of course, there is the matter of high interest rates which impacts all real estate investors. A major real estate scandal in Vietnam last year caused capital markets to reel in Vietnam and added confusion in the real estate market.
In this environment, credit returns are performing generally better so perhaps it's the case that Apollo is simply doubling down on credit. Apollo's Philip Mintz mentioned this in a 2023 podcast, "[r]eal estate credit, in my opinion, far surpasses the types of risk-adjusted returns you can get from the equity."