Standard Life Investments’ global real estate fund will take on a greater weighting to direct property assets and will adopt a bespoke benchmark devised by Investment Property Databank (IPD).

The fund, which was set up in 2005 to invest in a combination of direct and listed real estate investments, is being restricted to holding 50-80% in the former, following a consultation with existing and prospective investors.

Previously, the £420m Select Property Fund, which is being rebranded as the Global Real Estate Fund, could allocate between 25% and 75%.

“It is intended this will deliver a more stable mix of assets, lower volatility in the fund’s price movements and the potential for a higher income yield,” the company stated.

Andrew Jackson, head of wholesale and listed real estate, at Standard Life Investments, told IP Real Estate that the consultation revealed that the hybrid nature of the fund often proved problematic for asset allocators that had separate direct and listed property silos. A more “persistent” weighting to direct real estate was seen as a solution.

The fund is also adopting a global benchmark – IPD Direct/MSCI World Real Estate Custom Index – that combines direct and listed property investments.

“Our research team have worked with IPD over the last number of months to establish a more representative market for the fund,” Jackson said.

It is a bespoke index but Jackson said he hoped it would become a global standard. “We would hope this wouldn’t just be bespoke to Standard Life Investments, that this benchmark – or a very similar benchmark – would be developed as we see a greater number of global real estate funds entering the market over the next few years,” he said.

Following its takeover by MSCI in 2011, IPD has been in a position to start combining its coverage of the direct property markets with its parent’s coverage of the public markets. IPD were unable to comment on the potential for the benchmark being made more widely available.

In October, Standard Life Investments will switch from using the IMA Property Sector benchmark for the fund, which it said was “increasingly populated” by funds that invested only in listed securities.

The fund made its first direct investment in Japan this month. It also sold a logistics portfolio in Poland to Blackstone in May.

 

Topics