GLOBAL - The Townsend Group has agreed to be the cornerstone investor in the first fund to be launched by AEW Europe's new UK real estate business.
The seed capital, provided by an unnamed pension fund advised by Townsend, will facilitate the launch of the AEW UK Core Property fund.
It is the first vehicle to be launched by AEW UK, which was set up at the beginning of the year as a 50-50 joint venture with the former UK real estate team of UBS, led by Richard Tanner.
The commitment to the fund represents part of Townsend's wider strategy to provide the pension fund with exposure to UK real estate across the risk spectrum.
The fund will be diversified geographically in the UK and invest across all of the main property sectors.
Damien Smith, principal of The Townsend Group, said there were "a number of compelling features" that were taken into consideration when underwriting the investment, "including the alignment of interest of the management team, the quality and experience of the independent advisers to the fund and the teams' historical track record".
Much of the AEW UK team has worked together since 1994 and been involved in the launch and management of seven real estate funds.
Smith said: "Given the current market conditions, we have spent a significant amount of time analysing the performance track records of a number of managers over historical periods of time, which have had similar levels of uncertainty as we are seeing today.
"The AEW UK team has firsthand experience in building high-performing portfolios in similar market conditions to what we are seeing today."
Funds launched by Tanner and the team included the UBS ground lease fund, the management of which was subsequently taken over by Pramerica Real Estate Investors.
AEW UK is currently exploring the possibility of launching a similar fund under the AEW brand, called the AEW UK Inflation Linked Ground Lease fund.
Tanner, managing director at AEW UK, said Townsend's commitment to the new core fund "could not have come at a better time for a value manager".
"The market is starting to present interesting investment opportunities," he said. "The ability to create a portfolio from a blank sheet of paper, to handpick quality assets and buy them at today's prices, gives us a clear advantage over existing pooled funds with legacy assets."
AEW UK's Core Property fund is open-ended and has been structured as a UK exempt un-authorised property unit trust (EPUT).
But it will use an innovative new pricing mechanism in an effort to resolve the pricing and liquidity issues that have plagued open-ended property funds in the recent past.
A governance committee led by independent chairman George Henshilwood, formerly of Hymans Robertson, will be used to protect the long-term interests of investors.
AEW also intends to convert the AEW UK Core Property fund eventually to a property authorised investment fund, which offers UK pension funds the same tax benefits as real estate investment trusts.
Rob Wilkinson, chief investment officer at AEW Europe, said the new UK core fund would become part of AEW's series of open-ended core funds, alongside the AEW US Core Property Trust and the AEW Europe Core Income Fund.