Royal & SunAlliance Eurolife has established the RSAE Glanmore property fund, a mirror fund of Thesis Asset Management Internationals Glanmore property fund.
The RSAE fund provides access to UK commercial property through the underlying Thesis fund. Office space comprises 59 per cent of the portfolio, while smaller amounts are invested in the retail and warehouse sectors.
The majority of the buildings, around 70 per cent of the portfolio, will be let to tenants, including the Government, public companies and insurance companies. This part of the portfolio will produce returns of between 7 per cent and 8.5 per cent. The remainder of the portfolio will be actively managed to produce higher returns of between 8.5 per cent and 10.5 per cent.
The dismal performance of global stockmarkets has forced investors to look for alternatives, such as property, to boost their portfolios. The Investment Property Databank (IPD) UK monthly index shows that in the 12 months between July 2001 and June 2002, the total return from property was 8.5 per cent, while the FTSE All Share index produced negative returns of -14.8 per cent.
This fund will be managed along cautious lines, avoiding speculative developments and empty properties. However, there could be vacant periods when leases run out, so new tenants would need to be found. Also, high initial charges are inevitable for commercial property funds as expenses such as stamp duty must be paid. This fund is no exception, but some investors could be deterred from investing as a result.