The queue for redemptions from the open-ended UBS Trumbull Property Fund stood at 60.4% of the fund’s $10.8bn (€10bn) net asset value as of the end of 2023, according to a redeeming investor’s meeting document.
The document by investment consultant RVK for the City of Jacksonville Employees’ Retirement System shows that the fund redemptions amounted to $6.5bn at the end of last year.
The City of Jacksonville has approved redemption of its entire $62.3m investment held in the open-ended UBS fund, a move RVK attributes primarily to the UBS fund’s underperformance.
Through September 2023, the annualised returns for the fund have underperformed during the past 1, 3, 5, and 10-year periods by 7.88%, 9.06%, 9.1%, and 7.92%, respectively.
The fund’s manager UBS declined a request for comment.
RVK believes the fund’s lack of diversification was a factor contributing to its underperformance. Currently, the fund is concentrated in just two sectors – multifamily, which accounts for 41% and industrial, which accounts for 35% of the portfolio. This leaves no room for investments in currently favoured sectors like self-storage, student housing or medical office.
Additionally, the fund’s historical focus on core has limited its exposure to potentially higher-return opportunities in build-to-core and redevelopment investments.
UBS had expressed an interest in increasing its non-core exposure, however, additional capital earmarked for these types of value-add investments is challenged due to the large redemption pool obligation competing for fund liquidity.
The inability to sell assets quickly has limited UBS’s ability to meet redemption requests over the past two quarters, according to the Marin County Employees Retirement Association’s meeting document.
City of Jacksonville is also partially redeeming $30m from the Harrison Street Core Property Fund, $40m from the Principal US Property Account and $20m from the PRISA II fund.
The proceeds from these redemptions are planned to be re-invested by the pension fund into new commitments for non-core real estate.
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