Kames Capital has launched a fund that enables pension schemes to track the UK commercial property funds market by investing in a portfolio of open-ended balanced funds.
The Kames Active Beta Property Fund aims to match the return of the AREF/IPD UK All Balanced Property Funds Index with a low tracking error.
The fund might offer a way to mitigate liquidity risks that come with investments in open-ended property funds.
Fund manager Tony Yu said: “Most small and medium-sized pension schemes tend to access the property market through one or two balanced property funds.
“However, investor returns from some individual balanced property funds have been damaged by redemption issues in recent years, making it difficult for schemes to be confident in the long-term liquidity and performance prospects of a single fund approach.”
Kames Capital said the fund will invest in constituents of the index but will also “take small, risk-controlled active underweight or overweight positions against index weights” and use the secondary market to mitigate transaction costs.
Yu also said that many multi-manager and fund-of-funds products have “incorporated too much leverage and esoteric illiquid funds resulting in less liquid and more volatile returns than is desirable for UK schemes seeking a core exposure to the UK commercial property market”.
He said: “Our solution – investing in an actively managed diversified portfolio of open-ended balanced property funds – enables us to deliver returns with a risk profile appropriate for pension schemes seeking property market returns with an exceedingly low tracking error.”
Investors with existing balanced property fund holdings may be able to transfer them into the Kames fund on an in-specie basis.
The fund, which is managed by Yu and head of indirect property Mark Bunney, will be made available through Mobius Life’s institutional investment platform.