Alpha Beta launches first residential index fund

Alpha Beta Fund Management is launching the first UK Residential Index fund (UKRIF) for institutional investors in December. The fund is based on the Halifax House Price Index and gives pension funds, funds of funds managers and other investors access to Europe's single largest investment asset class, according to ABFM founding partner Robert Page. 'The development of property index funds provides a simple and easy way for real estate investors to take advantage of the varying cycles in European residential markets.'

The British housing market is valued at nearly £4 trn (EUR 5.7 trn) - twice the size of the UK's equities market, Page added. 'Our research shows that our funds can provide some surprising diversification benefits. The different residential property cycles in the UK and Continental European markets, combined with the varying central bank policies in the eurozone and Britain, as well as macroeconomic factors, together create a strong case for the cross-border diversification of residential property. Investors in European residential markets can now take advantage of the negative correlation between UK and Continental housing investment markets.'

Research by ABFM shows that the correlation between its Core UK Residential Index Fund and fund benchmarker IPD's Dutch residential index is a negative -0.51, and -0.54 and -0.21 respectively for residential indices in Sweden and Germany, Page said. 'There is strong interest in our product, also from continental investors including Dutch pension funds. We expect to pick up about £100 mln for our Core fund and the same amount again for our Value-Added fund. About 50-60% is already committed.'