The fund is aimed at investors who are looking for growth from a globally diversified property portfolio, while protecting their gains.
The fund applies constant proportion portfolio insurance to a basket of six Luxemburg-based property funds selected by Nomura. Under the CPPI process, emerging market equity exposure will be increased when the performance of the funds is strong, but reduced in favour of less risky assets when performance is weak, thereby protecting 80 per cent of the highest fund value. This locks in gains as well as providing a form of capital protection.
The basket of funds comprise Credit Suisse Asian property, Morgan Stanley Asian property, Credit Suisse European property, Henderson Horizon Pan European property equities, Morgan Stanley European property and Morgan Stanley US property. They are combined in a benchmark index created by Nomura International.
The fund’s allocation to each underlying fund will be reviewed and potentially changed each quarter. This quarterly review is based on research provided by Morgan Stanley Investment Management’s global property team. It enables Nomura to adapt the portfolio to cope with changing conditions in the global property market, taking advantage of short-term trends.
Nomura International says that property is a popular asset class for investors due to its performance and diversification benefits. It thinks the fund is likely to appeal to investors who are looking for access to the global property market and in particular, to regional property cycles, while maintaining a high degree of protection.
With yields on UK property relatively low compared with other regions such as Asia, more investors may be keen to invest in a global property portfolio. The protection feature may also provide peace of mind. However, one potential drawback is that although the portfolio is reviewed quarterly, it is only the weightings, not the funds that will change. An alternative may be a property fund of funds, although investors will not have the capital protection provided through CPPI.