UBS is raising a second fund to invest in Chinese residential real estate in response to strong demand, even though the government is attempting to curb prices, a report says.

UBS is raising a second fund to invest in Chinese residential real estate in response to strong demand, even though the government is attempting to curb strong prices, according to Bloomberg.

The Swiss bank is talking to existing investors for the dollar fund, which will focus on second-tier cities, Trevor Cooke, the head of global real estate for Asia Pacific at UBS Global Asset Management (Australia), told the news service. The bank’s first such fund, set up in 2008 with a $300 million target and scheduled to be fully divested in 2016, potentially will yield “very close” to its targeted 20 percent return, he said.

Policymakers in China have sought to restrain strong property prices, although the government has yet to impose nationwide curbs, the report notes. New home sales in China surpassed $1 trillion for the first time last year; investors put $10.7 billion into new property funds in 2013, an 80 per cent rise from a year ago, the report said.

After a “very detailed, forensic look at the residential market, particularly in second, third tier cities, we’ve come back feeling pretty confident there’s a very strong and compelling case” for a second fund, Cooke is quoted as having said.

While UBS is targeting a lower return between 16 percent and 18 percent for the new fund, compared with the first one, partly due to stronger competition, “that’s still a very attractive return,” Cooke said.