The first specialist UK property fund for defined contribution pension investors is to be launched next week with a target to raise more than £1bn ($1.6bn) as it exploits the wider changes in the pensions industry.
CBRE Investors has created a vehicle to tap into the rapid growth of demand among defined contribution (DC) pension investors as further traditional final salary schemes close.
The fund, which has been in planning for more than five years, will be the first time that defined contribution pension investors can access a fund run by an investment manager solely focused on real estate. There are products available for pooled investment at many larger pension and insurance groups, however.
Nick Preston, senior director at CBRE Investors, said the launch was in reaction to high demand among investors for a fund run by a specialist manager that knows the property sector.
The CB Richard Ellis UK Property Fund has been designed to meet the needs of DC pension investors under FSA supervision and is a non-UCITS retail scheme (NURS) that will be priced and traded daily.
The fund’s goal is to build a portfolio of £1bn, although Mr Preston said that the fund could grow larger depending on demand. He said that the first platform to use the fund would be announced next month. He added that the fund had been met with enthusiasm by investment consultants and platform providers who serve the DC pensions industry.
The structure also has the capability to take in portfolios of direct property assets from mature DB pension schemes looking to exit their property investments in an orderly manner.
It will be structured as a property authorised investment fund (PAIF), a tax efficient vehicle for UK real estate investors. It is the first daily traded PAIF to be launched, and it has a dedicated feeder fund for DC investors.
The fund will invest mostly in physical property assets, although it will also invest in property equities and some cash products in order to provide daily liquidity for investors wishing to sell.
Open-ended real estate funds were criticised during the crisis for not being able to cover the withdrawals from departing investors as they were not able to sell property fast enough in the falling market. This led to some blocks on redemptions and fire sales of assets.