OPM Fund Management has added a long and short European property fund to its multi-manager property portfolio to generate returns from this part of the market in difficult conditions.
The Amsterdam-listed Insinger de Beaufort real estate fund makes up 3 per cent of the OPM fund. It invests in the shares of European real estate investment trusts and real estate companies while using shorts and derivatives to reduce volatility and protect from market falls. The management team have been running the portfolio for some time and do not use leverage.
The European property market is made up of different regions and sectors, so that rental growth and the returns from property securities vary. This fund, which has the benefit of daily pricing, aims to take advantage of this by arbitraging between property securities within regions and sectors.
Selection of the property securities is based on a bottom-up valuation model. Overpriced property securities in markets with an unattractive outlook can be sold short. On the long side of the portfolio, the fund will hold specialist property companies within attractive markets. These will have a competitive advantage and a good track record.
Investment director Ross Henderson says: “We are not positive on European real estate but this fund looks at both buys and sells, with the opportunity to short overvalued opportunities.
“It is defensively positioned and will not perform as well as other funds in bullish times but it has produced consistent returns. It is up in the year to date while many other property funds are down.”