GERMANY - German health insurance group SDK has asked Union Investment to create an umbrella fund to manage its €250m indirect property portfolio.
German fund manager Union approached SDK with the idea for a bespoke, tax-efficient Spezialfonds that would include both the existing portfolio and a growth strategy for additional indirect investments over the next few years.
The vehicle will comprise two funds, one for each of the insurer's health insurance business (Süddeutsche Kranken) and its life insurance arm (Süddeutsche Lebensversicherung): SDK-Immoselect and SDL-Immoselect.
The fund manager will work closely with SDK on the selection of new funds as well as administering the existing funds and providing what the firm described in a statement as "advice on strategic focus".
Under the deal, Union will bundle SDK's existing indirect real estate investments and help select additional funds in retail, healthcare and industrial to diversify the portfolio. The augmented portfolio will also include alternatives such as timber.
Additional funds will be open-ended and "essentially conservative - the focus is on solid returns and economic sustainability", it was stated.
"As a vehicle it is a quite simple structure," a Union spokesman said. "It is only one layer working as an umbrella as other vehicles would work."
He added: "The selection process will be linked closely with the investor. It is no discretionary mandate."
The mandate announced reflects what Union believes is a shift in demand from real estate investors towards bespoke investment management, with increased demands for more flexibility from asset managers. The firm said it was also facing increased demand from smaller investors for help managing reporting and regulation requirements.
However, the spokesman said he believed the model could work equally well for other investor clients. "We believe this model is fully replicable. Moreover, our model could also incorporate direct property investments as well," he said.