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Property Special Report: Dial tone

PROFILE: Clare Bettelley interviews Brett Robinson, chief executive of Seven Dials Consulting.

Since leaving Axa Investment Managers in 2002 Brett Robinson has turned his hand to another different business area.

He set up Seven Dials Consulting providing research and financial consultancy specialising in property but he is now shifting his focus back to what he considers his strength, or at least his potentially more lucrative one, with the launch of Seven Dials European property fund.

Robinson is determined to use his fund management expertise to convince investors of the untapped value in the European commercial property sector, which he says is some way off from reaching the maturity of the UK.

He acknowledges that European commercial property yields have fallen and are set to fall further and he is also aware that many sceptics believe the European property market has peaked and is on the verge of a correction akin to that in the UK, which is now experiencing yields of around just 5 per cent – but he does not agree.

“Europe has not had its peak,” Robinson says. “Everyone is nervous about the UK and I would agree that yields are falling further so there is not much room for manoeuvre but there are opportunities in Europe to make money that are not reliant on yields falling.”

He cites European landlords’ inefficient use of retail and office space as one of the key drivers behind the untapped value he describes.

“Shopping centres are, for example, typically two years behind so there is lots of opportunity to create value before even thinking about yields falling, and that is why it is interesting,” he says. “It is not a case of Europe’s going to fall some more, further than the UK. There is a lot to play for.”

Robinson’s fund of funds proposition, which is the first fund launch from his research and consultancy firm, has an initial charge of up to 3 per cent – although this will be paid as commission – and a 0.45 per cent annual management charge, with an option to increase this to 0.95 per cent to cover 0.5 per cent renewal commission.

It also has a two-year lock-in, which, given that the minimum investment size is euro 40,000 (20,218), is, as one financial adviser points out, “a bit harsh”.

The lock-in is clearly a contentious issue for Robinson who is quick to defend his decision.

“I entirely understand the reaction but what investors do not understand is where we have come from to do that.”

“These funds that we are going to invest in are fantastic quality funds run by the top managers in the property fund management world. These products are targeted at big, institutional investors so these are investment opportunities that IFAs would never see – we are bringing them access.”

Robinson says a prerequisite for the fund managers with which he is working is experience and for them to be part of a network in their respective country.

“You cannot run a fund investing in, for example, Scandinavia, sourcing stock and based in London,” he says. “More private deals are done in Europe so if you don’t know the people, how are you going to buy it?”

The lock-in is one of a number of features that Robinson had to consider when setting up the fund. He says a fund of funds’ structure was inevitable. “We are not direct property people, never have been and are not trying to be,” he says. “We would only ever do direct property in conjunction with specialists, so fund of funds was our obvious territory because that is what we are good at.” He adds that it would have been “a stretch” to do an authorised fund onshore. “You have got to have good marketing capabilities and we were actually on a much smaller scale than that.”

Robinson said the decision to create an open-ended fund came late in the day.

“We thought we would do a closed-ended vehicle originally, principally because what a lot of things people invest in are quite illiquid,” he says. “But then as we were working on it, we thought actually, this is still quite illiquid but what people want and what they generally prefer is open-ended so what the hell, why not?

“Like most property funds, you have restrictions on redemptions anyway and these things are getting more illiquid and the markets are developing so we felt that it was the right thing to do.”

A maths Cambridge graduate, Robinson’s appetite for fund management was born at Guardian Asset Management, the asset management arm of Guardian Royal Exchange, which was acquired by Axa UK in 1999. He joined from Commercial Union where he worked in quantitative analysis at the same time as studying for an MBA.

Robinson is the first to admit the size of the challenge of dealing with property as an asset class when he took over the management of Guardian’s 7bn life fund.

He says: “There was this 600m to 700m pot of property and I was going, what the hell is this? I don’t know anything about property, so that is when I started to understand.”

Robinson says he was particularly interested in the immaturity of the market. “You have got a lot of numbers in property – rent and cashflows – which is interesting for a nerdy kind of person like me. But actually to make money, you really need to understand more than just the numbers,” he says. “Property is about a mixture of partly secure income, depending on the credit worthiness of the tenant, and equity participation since rent go up over time,” he adds.

He spent a year working for Axa after the Guardian takeover, thereafter indulging in his long-term desire to go solo. But it was not until late 2002 that he set up Seven Dials Consulting, initially with former GRE colleague, Stephen Palmer.

Robinson also dabbled in the internet, launching a financial modelling firm in which he has just sold his remaining stake.

It was the later parting of ways with Palmer that prompted Robinson to take sole ownership of Seven Dials at the same time as launching his new fund.

He acknowledges he was “a bit slow” to the market, given the fall in yields but insists there is still plenty of value for the taking, partic-ularly in Scandinavia.

He will now concentrate on ramping up the marketing for the fund, which has raised euro 18m (9.1m) so far, at the same time as preparing for further fund launches, which, he says, are likely to include a global fund, possibly focused on Asia.

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