The fund, the IFSL North Row Liquid Property fund, will be managed by Steven Grahame of North Row Capital and will launch next month, subject to FCA approval.
The daily-priced vehicle will offer investors exposure to the global real estate markets by investing mainly in property derivatives, as well as property equity and debt, in order to gain exposure to direct property markets.
The open-ended fund will aim to deliver a high correlation to direct property markets, targeting a high income yield of 4.5%-5.5% with low volatility.
The fund will be actively managed using a fundamental and quantitative research process to identify misvalued markets, identifying misvaluations between property debt, equity and direct markets, while measuring and controlling risk via BMF’s own risk management process.
As well as daily dealing, the fund will have no performance fee, no entry/exit fee and will aim to have a significantly lower TER than directly invested funds available on the market.
“When Steve outlined the idea to us, to use derivatives and synthetics to produce property-type returns for capital and income with daily liquidity, we thought it had significant advantages for certain investors,” said Simon Wombwell, chief executive officer of BMF. “We feel it offers something which would complement other property holdings.”
Currently, BMF is the named manager of the fund, with the day-to-day running outsourced to Grahame and Niall O’Connor of North Row. In due course, said Wombwell, North Row will apply for the appropriate authorisation to take over as named manager.
“The fund is designed to replicate a property-type return, so it will have the correlation of property to other assets,” Wombwell added. “We’re targeting a commercial property-type return, but we’re not aware of anyone else taking this approach.”
If the vehicle proves to be a success, Wombwell said BMF would look to apply the same strategy to other real assets and launch further funds. “For now, though, the priority is to make sure it works in relation to commercial property.”
