A number of leading real estate managers have backed the launch of the first UK property derivatives fund.
The fund is to be launched by inProp Capital – which was created by former of the Bank of America property derivatives team – and will offer returns linked to the benchmark property index through the use of swaps and futures contracts, according to reports.
Among the backers is Scottish Widows Investment Partnership through its flagship Swip property trust, Prudential’s real estate fund manager PRUPIM and the Skandia property fund, which is advised by ING Real Estate.
Derivatives trading volumes have fallen drastically in tandem with the slump in the property market. Global volumes hit their lowest level in four-and-a-half years in the second quarter of 2010, with just £300m executed in 62 trades. This is down from £500m in the first quarter.
The inProp fund will be listed on the Irish Stock Exchange. The fund is unleveraged, monthly liquidity and will allow investors to trade with almost no fees.
The fund will track total returns as measured by the Investment Property Databank UK index, the industry benchmark. Total returns from the IPD index stood at 0.7 per cent in August.