Aegon Asset Management has set up a new UK real estate fund for defined contribution (DC) pension investors, to help the investors increase their allocation to the asset class and ease liquidity challenges.
The asset manager and Mobius Life have launched the Aegon Active Beta DC Property Fund, with seed funding from an unnamed “major UK pension plan”.
Aegon said the new fund is a version of the Active Beta Property Fund, the first fund to track the UK commercial property funds market, which was launched in 2017.
The Active Beta Property Fund is a pooled pension fund which aims to track the UK commercial property funds market. By taking small, active positions across a range of balanced property funds, the Active Beta Property Fund aims to deliver returns with a risk profile that is appropriate for UK pension schemes investing in property as a diversifying asset class.
Aegon said it was asked by investment consultants and DC platforms to develop a version of the Active Beta Property Fund which would meet the liquidity requirements of the DC pensions market, which led to the development of the Aegon Active Beta DC Property Fund.
Working with their advisers, Lane Clark Peacock, ”a major UK corporate DC pension plan has seeded the new fund, which is available as a pooled pension fund through Mobius Life”, Aegon said.
Tony Yu, manager of the Aegon Active Beta DC Property Fund, said just one-third of DC pension schemes invest in commercial property, compared to two-thirds of DB schemes.
”Challenges around liquidity, fund switching costs and portfolio diversification have hindered higher allocations to commercial property from DC schemes.
”The new Aegon Active Beta DC Property Fund seeks to address these issues, with the aim of providing long-term exposure to the UK property market with daily liquidity and returns in line with the index of balanced funds.”
Stephen Budge, head of DC investment strategy at Lane Clark Peacock, said: “Property has historically delivered attractive returns with relatively low correlations to other assets, so has an important role to play for pension schemes.
“We were attracted to the simplicity of the Active Beta approach, how it manages manager risk, and the track record of the strategy.”
Adrian Swales, Mobius Life CE, said: “We are seeing increased interest in our capability to manufacture products for international asset managers. The flexibility of the Mobius Life platform allows innovated products to be offered to the DC pension market.”
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