With a current estimated annual yield of 6%, head of retail sales Steve Kenny believes the fund will hold a valid place in investors’ portfolios alongside their existing property holdings for its ability to generate a higher yield.
As Kames' first foray into the wider retail commercial property market, it will draw on its existing property team’s expertise previously only available to institutional investors.
Take a blended approach
Kenny made the comparison with the fixed income space, where investors often have core vanilla holdings that are complemented with high yield bond funds to generate a higher return.
He said by looking beyond London and the prime real estate sector the fund is able to access a largely untapped market.
Managed by David Wise and Alex Walker, the Kames Property Income Fund aims to deliver the competitive income stream with the potential for capital growth over the longer term.
It will be managed using an 'active value' strategy, which aims to exploit the gap between prime and secondary property and is currently employed on two of its existing institutional funds.
The portfolio will aim to add value through holding good quality assets which possess the ability to enhance the yield through initiatives such as refurbishments, lease extensions and new lettings.
Core property gives liquidity
The strategy focuses on asset management opportunities in the £2m-£10m price bracket – often seen as too big for most private buyers and too small for many institutional investors. In addition to active value investment style properties, a core property allocation will be maintained for liquidity purposes along with indirect property and cash holdings.
The PAIF will invest up to 80% in direct property but may also invest in indirect property and equities including property companies, REITs and specialist property funds as well as cash.
Kames director of property investment David Wise said: "We believe the UK property market has finally turned the corner with property valuations benefiting from the recovery in the UK economy. However UK banks and other distressed property owners remain sellers meaning many buildings are still available at attractive prices."
