AXA Investment Managers has launched a fund that will mimic direct property by investing in the debt and equity of listed real estate companies.
The AXA WF Global Flexible Property fund, which will target a 60% allocation to equity and 40% debt, is designed to replicate the liabiltiy side of a real estate company’s balance sheet and the return profile of direct real estate.
AXA IM said the fund will provide daily liquidity, reduced volatility, improved diversification and lower transaction costs compared with direct real estate investments.
The manager can change the asset allocation and equity exposure of the fund according to the property cycle, with the aim of reducing overall volatility.
The Luxembourg-domiciled fund, which is open to institutional and retail investors, will be managed by professionals from AXA IM and its subsidiary AXA Real Estate.
Isabelle Scemama, head of funds group at AXA Real Estate, said the fund was a latest example of AXA IM’s “360-degree approach to real estate”.
Frédéric Tempel, global head of listed real estate at AXA IM and lead manager on the fund, said: “Property holds a lot of appeal as an asset class with strong historical performance and resilient income; however, investors have previously had to choose between illiquid, physical real estate, and liquid, yet often volatile, real estate equities.”
Tempel added: “Mixing real estate equity and debt instruments in one liquid strategy is a relatively recent investment opportunity. The disintermediation of banks following the global financial crisis has created a much deeper market for real estate debt.”
Other funds in the market already invest in the debt of listed real estate companies. IFSL North Row Liquid Property Fund invests in REIT debt alongside property derivatives, while InProp is also talking to investors about a similar strategy.
The announcement also follows the launch by BlackRock of exchange-traded fund (ETF) designed to mimic the direct UK property market.