The fund, which can use the maximum flexibility allowed under the non-Ucits retail scheme structure, aims for income and growth by investing in a diversified portfolio of property-related investments. It will comprise property funds, Reits, listed property securities and structured products. Fixed-interest, cash and money market instruments may also be used to enhance the returns.
The fund will be co-managed by investment director Tony Yousefian and investment manager Ross Henderson. Yousefian will take a top-down approach, which will be complemented by Henderson’s bottom-up analysis.
The managers will have a global remit, with no restrictions on country and sector weightings. The biggest sector allocation in the initial portfolio will be 62 per cent in property funds that invest in bricks and mortar. This is because OPM wants to benefit from the rental income captured by funds that invest in physical property.
Direct investment in property related companies such as house builders make up 20 per cent of the initial portfolio, while the remainder goes into Asian Reits and floating rate notes.
In terms of geographic weightings, the initial portfolio’s biggest allocation is 27 per cent to UK property funds. Europe will represent 21 per cent of the portfolio, while 18 per cent is invested in the Far East. At the other end of the spectrum, the smallest weighting is 3 per cent in the US, as the managers believe there are better opportunities to be found elsewhere.
The recently launched New Star international fund, which invests globally in bricks and mortar excluding the UK, is currently OPM’s top holding. It comprises 22.5 per cent of the portfolio as OPM is keen to diversify away from the UK, where commercial property yields are relatively low.
The popularity of property as an asset class has led to a proliferation of fund launches across all areas of the market, from bricks and mortar funds to those focusing only on property shares. This could make a case for a property fund of funds, as more choice can make fund selection difficult for non-specialists.
While investors in bricks and mortar funds may face against liquidity issues and the prospect of sitting in cash while suitable investments are found, investors in property securities funds may find there is a higher correlation to equities relative to bricks and mortar funds. Investing in both types along with other property-related assets within a fund of funds will diversify the risks of investing only in one type. However, its success will depend on finding the right blend of assets and shifting this in line with market changes.