FRANCE - Launch of two European futures contracts on the Paris derivatives market will give investors "cost-effective, simple and efficient" exposure to listed property, according to Liffe, Euronext's London-based derivatives business.
Liffe will base the contracts - launching on the Euronext derivatives market in October - on the FTSE EPRA/NAREIT Europe and FTSE EPRA/NAREIT eurozone indices.
The first covers 100 listed companies in 15 countries, with its largest weighting in the UK while the second covers 50 companies in nine Eurozone countries, with its largest weighting in France.
Liffe spokesperson Hadi Hmamed said the futures offered diversification for investors as a proxy for direct investment, with the potential for hedging.
"We'll have different types of investor - those looking to boost their portfolio's performance and indirect investors looking for a proxy," he said. "I don't know which will form the majority but we'll see."
These contracts, which are the first of their kind in Europe, reflect recent interest in property-linked financial instruments, notably derivatives.
"A few years ago we couldn't have done it," said Hmamed. "Now investors are comfortable with indices. It's a good moment."
Frédéric Ducoulombier, director of asset management education at EDHEC, the French business school, told IPE Real Estate derivatives were "theoretically very attractive", but added they should be "highly effective as hedging instruments for diversified indirect real estate portfolios - and terrible for direct portfolios."
Allan Schoenberg, a spokesperson for CBOT, which pioneered this kind of product in the US, dismissed claims that it had underperformed.
"We're happy with the results to date, given that the product is so new," he said. "You could never predict volumes because real estate is different from other products."
Demand in the US has come primarily from asset managers and hedge funds, rather than from traditional pension funds, although Schoenberg identified the latter as a target market.