The fund aims for income, with an initial target yield of 4.5 per cent, and capital growth by investing in real estate investment trusts, offshore property companies quoted on the London Stock Exchange and other commercial property shares in Europe including the UK. It will also have the ability to invest up to 20 per cent outside Europe, which will enable it to take advantage of opportunities particularly in the Hong Kong Reits market.
The growing popularity of Reits in Europe is the driving force behind the introduction of this fund. Unlike other means of investing indirectly in property, there is no double taxation on income as Reits do not pay corporation tax. But they must distribute 90 per cent of their dividends and Buckles believes this will be good for investors looking for income.
Alex Ross of Premier Portfolio Managers will manage the fund for Buckles. He joined Premier in June from Aberdeen, where he spent seven years running the Aberdeen property share unit trust. He has also worked for Barclays de Zoete Wedd and Ivory & Sime.
Ross will manage the Snowdonia fund on a bottom-up basis and will hedge investments back into sterling to avoid currency risk. He believes the introduction of Reits in the UK and in Germany will provide good opportunities for investment.
He points out that over 73 per cent of German companies own their own premises compared with about 25 per cent of companies in the UK and the US. Consequently he believes many German companies will be offloading their properties onto Reits through sale and lease back arrangements, providing opportunities for this fund.
Investing in property shares has a number of advantages over investing directly, including greater liquidity, which will allow Ross to get quickly in and out of pockets of growth within property sub-sectors. It also enables him to benefit from consolidation within the quoted property company sector.
However, other companies including bigger names such as Skandia and Fidelity International are also seeing the potential of Reits and are expected to bring out products which will compete with Buckles. However, having Ross of Premier at the helm should benefit the Snowdonia fund.