The Real Deal New York

Kazakhstan looks to up sovereign real estate investments

Energy-rich Central Asian nation hosted Blackstone, Carlyle Group as it seeks to boost returns

December 28, 2015 12:25PM

Kazakhstan Nursultan Nazarbayev

From left: Kazakhstan’s capital of Astana and president Nursultan Nazarbayev

The Central Asian nation of Kazakhstan is seeking to boost returns on a possible $93 billion in wealth funds, and some of real estate’s biggest private equity players could be the beneficiaries.

Kazakhstan president Nursultan Nazarbayev hosted a September dinner at the Four Seasons Hotel in Midtown that was attended by the likes of KKR & Co. founder Henry Kravis, Blackstone Group chair Stephen Schwarzman and Carlyle Group co-founder David Rubenstein.

Nazarbayev sought to stoke interest in investment opportunities in his country, but Kazakhstan is also planning to increase its own investments in real estate, private equity and hedge funds in an effort to boost returns, according to Bloomberg.

Kazakhstan’s $64 billion National Fund has struggled to achieve an average return of 2 percent annually for the past five years, and Central Asia’s largest energy exporter is looking to real estate and other alternative investments as the price of oil flirts with an 11-year low and returns from commodities slump to levels last seen in 1999.

“We are sitting on a huge pile of cash and not making real returns,” Berik Otemurat, who helps manage $800 million as CEO of Kazakhstan’s National Investment Corp, told Bloomberg. “It’s especially urgent to address this, given the gloomy outlook for oil prices and reduced inflows into the National Fund.”

Real estate is attractive to sovereign wealth funds after returning an average of 14.1 percent last year – almost double their 7.4 percent target, according to a survey by Cornell Unviersity and Hodes Weill & Associates this month. Arabian Gulf funds, for instance, are switching investments out of financial services and into hotels and retail, Moody’s Investors Service said in a report last month.

Sovreign investors were net buyers of more than $36 billion in real estate globally through Dec. 7 – a 60 percent increase from the previous year, according to data from Real Capital Analytics. [Bloomberg]Rey Mashayekhi

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