Daiwa Securities plans to launch a real estate fund with two partners, tapping investor demand for a piece of Japan’s booming property market.

The Japanese brokerage will collaborate with Osaka-based developer Samty and fund manager Hillhouse Investment, according to Daiwa’s Masatsugu Oishi. It aims to raise ¥100 billion ($690 million) via a private fund for domestic and overseas institutions, said Oishi, who is general manager of asset management strategy.

Daiwa will target Japanese rental housing and hotels, assets that tend to be better insulated from inflation compared with other sectors, at a time when consumer prices are rising at the fastest pace in decades.

Many real estate investors in Japan remain bullish, even as one key indicator, prices of new condos in Tokyo, fell in 2024 for the first time in six years after a record 2023. A low supply of apartments and higher raw material and labor costs mean that new homes in Japan’s capital will likely resume getting pricier, analysts say.

For Daiwa, success in overseeing the fund will help with the company’s goal of boosting its asset management operations. Those provide a stable source of income, at a time when a shrinking national population pressures its traditional broking businesses.

Daiwa plans not only to continue operating in areas like listed real estate investment trusts and private REITs, but expand its private fund offerings. The securities firm aims to increase its real estate asset management investment holdings by 25% from the end of fiscal 2024 to ¥2 trillion by fiscal 2030.

"Expanding our investment holdings will improve profitability and lead to increased corporate value,” Oishi said.

Samty, which operates rental apartments, was delisted in January after Hillhouse took it over. Daiwa Securities, which was the largest shareholder, continues to hold its stocks after the developer exited the exchange. The three companies had indicated their intention to cooperate to strengthen Samty’s asset management business by leveraging Hillhouse’s fundraising capabilities and international investor network.

Hillhouse is one of the world’s largest alternative investment management firms, established in 2005 with funding from the Yale University Endowment Fund. It manages assets for university endowments and government-affiliated investment funds in Europe, the U.S., Asia and the Middle East.

In 2020, it unveiled an investment strategy centered on real estate, handing over $3.5 billion to more than 16 real estate companies across Asia.