GLOBAL - Pacific Real Estate Capital Partners (PRECP) is to launch low-cost, liquid global real estate fund aimed at institutional investors "frustrated" with the performance of traditional property funds.
The Liquid Property Fund will invest in real estate instruments and transferable securities around the world to give investors a stable, liquid and globally diversified real estate exposure without the cost associated with direct vehicles or funds of funds.
Steven Grahame, chief investment officer at Hermes Real Estate and a former pension fund adviser at Towers Watson, has joined PRECP to launch the fund and set up a new business platform called Pacific Real Estate Alternatives.
He said: "Having worked closely with chief investment officers and trustees of many pension plans, it has become increasingly evident there is significant frustration with the poor performance of many direct property investment vehicles, the high cost of buying and selling direct real estate, the lack of liquidity in most funds and the lack of real diversification.
"Indeed, the complaint from property investors was they had to pay active management fees for strategies that were little more than buy/hold.
"Issues were compounded when some of the open-ended balanced funds were closed to redemptions or suspended trading in units, forcing investors to endure illiquidity traps."
The fund will be an open-ended investment company and invest in listed real estate, such as real estate investment trusts, real estate debt (in the form of commercial and residential mortgage backed securities) and derivatives on property indices.
The unleveraged fund will aim to deliver a stable direct property return, having an expected distributing income yield of 4-5%, and seek to outperform the UK IPD index while avoiding the downturns and illiquidity traps of traditional property investment options.
It is expected to be the first real estate fund to obtain tax-elect status, delivering a tax-transparent and efficient onshore fund structure for tax-exempt investors.
Grahame added: "We are not using any direct leverage, and we will be providing investors with full transparency, with daily independent valuations and liquidity.
"The fund will not be charging a performance fee, suiting institutional investors (particularly defined contribution) and sovereign wealth funds that want to gain access to property market efficiently.
"We are also happy to review existing property portfolios and offer a transition service to make portfolios more efficient."