UK - St Bride's Strategic Advisers, the start-up firm established by former ING Real Estate Investment Management chief executive Robert Houston, is raising capital for two "parallel" club funds targeting London real estate investments.
The two funds will focus on income-producing assets in the London office and industrial sectors, respectively.
The intention is to launch a series of small funds of £30-70m each, rather than seeking to raise £250m (€297m) for single products, allowing greater flexibility on market pricing and investor involvement.
Houston said this would allow each vintage to be priced based on current market circumstances, while allowing investors the choice of investing across the series or to pick and choose.
He said: "Each vintage might be one, two or three properties. So if an investor is looking for diversification, we would hope they would look to come in for all vintages."
St Brides has a long-term strategy to focus on the 20 main cities in the world, but it is focusing on London for its debut offering, where it sees prospects to benefit from rental growth.
The lifetime of each club fund is 10 years, including a two-year wind-up period. There will be a review at the end of the fourth year where investors can look to exit.
Liquidity and the ability to exit strategies have become increasingly important factors for investors in recent years, and the ability to review the strategy should provide some added comfort.
However, any redemption would be at a discount to net asset value, and other investors would be able to take over the interest.
The strategy of both funds is to focus on delivering strong income returns, and St Bride's has decided to charge a performance fee specifically on the income component rather than total returns.
Houston said this would achieve a better alignment of interest between the fund manager and investors, with the performance fee actually being based on the distributions paid to investors.
"The strategy is to achieve a minimum income return and to grow it, and our management fee will be based and aligned to the income return," he said.
While St Bride's will be motivated by the performance fee to generate strong income returns, Houston said the firm would forfeit its performance fee if total returns were negative, through unexpected falls in capital value, for example.
The club funds will not use leverage, except where it would be appropriate to fund unexpected capital expenditure or to allow existing investors to buy out an investor wanting to exit the fund.