Kalsi

NEW YORK — Morgan Stanley Group Inc. has raised the largest global property fund in history, an $8 billion repository the company will use to bankroll investments primarily in fast-growing Asian markets including India.

Morgan Stanley Real Estate, the New York-based investment bank's property-investments arm, announced June 20 that it had successfully completed fundraising for the Morgan Stanley Real Estate Fund International VI.

The parent company invested $1.6 billion in the fund, and the rest is comprised mainly of equity commitments from institutional and retail investors in North America, Europe, the Middle East and Asia.

The fund will target non-U.S. real estate assets, portfolios and companies mainly in developed markets, including Japan, Western Europe and Australia, and emerging markets like China, India, Russia, Turkey and Latin America. Approximately 60 percent of the fund has been earmarked for Asia, with another 30 percent set aside for Europe.

The division said that it will invest approximately two-thirds of the Asia allocation — about 40 percent of the fund's total value — in Japan. Twenty-five percent of the fund — about $2 billion — will go toward Asian nations such as India and China, where surging economic growth is fueling a boom in apartment and office construction.

A Morgan Stanley spokeswoman said the fund targets Japan because of its strong economic performance in recent years. The island nation emerged from an economic swoon in 2005 that began in the early 1990s — the result of over-investment during the late 1980s and domestic policies intended to wring speculative excesses from the stock and real estate markets. Japan is currently enjoying its longest economic expansion since World War II.

She added the company has set its sights on India and other Asian markets because it feels they hold "strong potential for future growth."

Investment targets in the region include "high-quality assets" like residential developments and commercial properties that have been put up for sale by companies looking to divest their real estate holdings.

"These companies buy properties, hold them for a while and then sell when they're ready to divest," the spokeswoman said.

John Carrafiell, managing director and global co-head of Morgan Stanley Real Estate Investing, said the fund's massive value reflects growing interest among investors in the worldwide real-estate sector.

"The record size of this fund, both for Morgan Stanley Real Estate and among real-estate investment managers, is indicative of strong capital flows into real estate as new investors seek exposure to the asset class and existing investors increase their allocations," Carrafiell said in a statement. "Real estate is increasingly becoming an important component of an asset allocation strategy because it offers portfolio diversification and the ability to invest in 'real assets,' which provide uncorrelated investment returns compared to other asset classes."

The Morgan Stanley fund is just one of several multibillion-dollar property funds that domestic and international investment banks have already launched or are in development. Thus far, New York-based private-equity firm Blackstone Group L.P. has raised more than $7.2 billion toward a goal of more than $10 billion for two new real-estate funds, and Wall Street rival Goldman Sachs Group Inc. has raised a $4 billion global property war-chest.

Separately, Zurich-based financial-services giant Credit Suisse Group is planning a $2.5 billion fund. According to the London-based research firm Private Equity Intelligence Ltd., investment banks and private-equity firms are looking to raise a combined $69 billion from more than 100 real-estate funds. If successful, the total would smash the record $64 billion raised last year, the firm said.

"We believe that attractive opportunities to invest in real estate around the globe will continue as demand for all asset types outpaces supply," Sonny Kalsi, managing director and global co-head of Morgan Stanley Real Estate Investing, said in a statement. "Global employment growth, an aging population in the west, a growing population in the east, and accelerating urbanization in many emerging markets will drive the need for all types of quality real estate."

Morgan Stanley Real Estate is currently engaged in a buying spree of offices, hotels and residential properties around the world; the firm invested some $12.5 billion in real estate in May alone. That sum includes an agreement to purchase the Investa Property Group, an Australian diversified property owner, for $3.9 billion, and Forth Worth, Texas-based real-estate investment trust Crescent Real Estate Equities Co. for $2.78 billion.

In April, the company signed agreements to purchase 13 hotels and two property units in Japan from All Nippon Airways Co. for $2.41 billion — the largest-ever Japanese real-estate acquisition by an outside investor — and another 10 hotels in Europe from Hilton Hotels Corp for $770 million.

The latter transaction increased the company's worldwide hotel holdings to more than 80.

Morgan Stanley Real Estate comprises three major global business units: investments, banking and lending. Since 1991, when the company launched its first high-return property fund, the division has acquired more than $121.5 billion in real-estate assets worldwide.

Morgan Stanley began investing in real estate following the U.S. savings and loan crisis of the 1980s, when more than 1,000 thrifts collapsed after speculating on property and forcing the U.S. government to sell off defaulted mortgages at steeply discounted prices.