EUROPE – AXA Real Estate has raised £125m (€153m) mainly from defined benefit (DB) pension schemes for a UK long-lease fund with a target war chest of £1bn by 2018.
The AUM €43bn real estate manager raised the capital for the first close of the open-ended fund within six months – a result it said reflected strong appetite for long leases among DB pension schemes concerned with match their liabilities with income streams greater than those available from Gilts.
One concern for investors will be the fund manager's ability to deploy the capital raised in a portfolio it claims will be "broadly diversified", given the limited number of asset subclasses characterised by the minimum 20-year leases targeted by the fund.
However, a spokesman provided a list of potential asset subclasses, including retail, residential, logistics and hotels, as well as niche segments such as data centres and recycling centres.
"Given the broad range of sectors we can consider, we have every confidence we can build a well-diversified portfolio," he said.
Asked whether the investor manager was concerned about pricing in some segments associated with long leases, such as student accommodation, the spokesman said AXA would assess potential acquisitions case-by-case.
Although AXA Real Estate declined to comment on plans to export the long-lease model, it has not ruled out launching funds targeting long-lease assets elsewhere in Europe.
"As a rule, we don't comment on potential funds until they have been launched," said the spokesman.
But he added that there was "plenty of scope" to target long-lease assets across Europe via its alternatives platform.
One of the platform's vehicles, the Alternative Property Investment Venture Fund, is expected to increase in size from its current €750m to €1.5m within the next few years.