Kames Capital has launched a fund which enables pension schemes to track UK commercial property funds market by investing in a diversified, representative portfolio of open-ended balanced UK property funds.
The Kames Active Beta Property Fund aims to match the return of the AREF/IPD UK All Balanced Property Funds Index with a low tracking error. The fund is managed by Tony Yu and Kames’ head of indirect property Mark Bunney.
The fund will invest in a portfolio of commercial property funds that are constituents of the Index, with Kames’ Indirect Property team taking small, risk-controlled active underweight or overweight positions against Index weights and transacting on the secondary market to mitigate transaction costs.
Phil Clark, head of Kames Capital’s award-winning* property investment business, says: “Our Indirect property team have a long track record of delivering excellent investment performance for our clients, and this fund provides clients with an innovative way to access property returns.”
Yu says: “Most small and medium sized pension schemes tend to access the property market through one or two balanced property funds. However investor returns from some individual balanced property funds have been damaged by redemption issues in recent years, making it difficult for schemes to be confident in the long term liquidity and performance prospects of a single fund approach. Meanwhile, over the past 10 years, we believe that many multi-manager and fund-of-funds approaches have incorporated too much leverage and esoteric illiquid funds resulting in less liquid and more volatile returns than is desirable for UK schemes seeking a core exposure to the UK commercial property market.
“Our solution – investing in an actively managed diversified portfolio of open-ended balanced property funds – enables us to deliver returns with a risk profile appropriate for pension schemes seeking property market returns with an exceedingly low tracking error.”
Bunney adds: “There are various routes to investing in property, but due to the unique nature of the asset class, truly passive solutions have previously not existed. However we believe that the Kames Active Beta Property Fund offers a unique route for pension schemes to achieve a diversified property market exposure and that our team has the track record to deliver this with the appropriate risk profile.”
From June 2017 the Kames Active Beta strategy will be available through Mobius Life’s institutional investment platform as a tax-efficient life-wrapped fund, a structure which is attractive to UK pension schemes. Potential investors holding existing balanced property funds may be able to transfer these into the Fund on an in-specie basis. The Annual Management Charge (AMC) of the fund is 0.24 per cent.
