The New Star international property fund has a target income yield of 4 per cent and will focus on established international property markets mainly in Continental Europe, Asia and the Pacific Rim. It will invest in properties that have attractive rental growth potential that is not yet reflected in the price.
New Star’s chief executive of property asset management Roger Dosset will be the lead manager for the fund. He will manage the direct property part of the portfolio along similar lines to his role within New Star’s property unit trust. Head of global property Stuart Webster will co-manage the fund, having joined New Star for this launch. He brings 20 year’s global property investment experience to New Star and has worked for global property advisor DTZ International, Savills and Citigroup Property Investors.
Dosset and Webster will have input from European and Asian heads of property acquisitions, Robin Carr and Simon Tyrell. New Star joint chief investment officer Gregor Logan is responsible for the property securities and cash elements of the portfolio.
The new fund will aim to hold 80 per cent in direct property, although at times it may hold less than this because of the time it takes to acquire properties. It will hold quality commercial properties leased to blue chip tenants, because the greater the quality of tenant, the greater the security of income. Strong leases will reduce the risk of having empty properties and good facilities can help to attract and retain quality tenants.
The fund will blend investments in developed countries that exhibit lower, more stable returns with investments in developing countries that have higher potential returns. Property shares are included to provide diversification as well as liquidity, since property shares have a higher correlation with stockmarket movements than direct property prices.
Another benefit of including a small allocation to property shares is that they can provide exposure to regions that would be too expensive to hold directly, but the drawback is that they can be volatile.
Advisers and their clients are likely to welcome this fund as it opens up direct commercial property investments on a global basis. However, the success of a fund like this will depend on local knowledge and contacts, so New Star will need to rely heavily on the international experience of its property investment team.