London-based Russell Investment Group (Russell) has announced the launch of
its first Global Real Estate Securities Fund for European clients, which offers
investors access to a growing asset class through a liquid, regionally diversified
vehicle.
Benchmarked against the FTSE EPRA/NAREIT Global Real Estate Index, Russell
says that the fund is available in Euro and Sterling hedged share classes. Derek
Williams, former head of research at Land Securities Plc, Europe's largest real
estate company, will be responsible for private and public real estate securities
manager research in Europe and back-up portfolio manager responsibilities.
According to the 2005-2006 Russell Survey on Alternative Investing, European
institutional investment patterns in real estate are changing rapidly. Since
2003 there has been a 24% up-tick in indirect investment versus direct investments
in land and buildings, growth which is chiefly attributable to increased use
of core funds and public real estate securities.
Karl Smith, Director of Real Estate at Russell noted that:
“Historically, direct investing was the primary route to real estate
exposure. However, the market has changed dramatically in recent years with
the growth of tax-efficient vehicles such as REITs or REIT-like structures.
Global real estate securities today constitute around 10% of a $5 trillion global
institutional real estate universe. This growth in demand for indirect investment
vehicles was instrumental in our hiring of Derek, to help us more directly meet
the specialised investment needs of both our European and non-European clients
that are seeking investment opportunities in Europe.”
Mr Smith observed that REIT legislation pending in a number of European Union
jurisdictions will lead to continued strong growth in real estate investing.
"Global real estate securities funds offer a level of geographic diversification
absent from most direct investment strategies. Our global approach offers investors
the opportunity to significantly reduce single market risk and volatility by
diversifying out of their domestic market," he continued.
“The availability of REITs will also change the way people invest in
property. Institutional investors have diversified their equity exposure internationally
for years, but most have limited their property exposure to the domestic market,"
Mr Smith added.
Meanwhile, Mr Williams noted that investors are increasingly looking towards
alternative asset classes such as real estate to provide diversified and non-correlated
returns.
"Since rental contracts are typically medium to long term and are either
directly or indirectly linked to inflation, investors typically gain exposure
to higher yields with little correlation to ‘normal’ equity and
bond return patterns. This approach is also much less capital-intensive than
direct investment, making the asset class available to many smaller investors
for the first time," Mr Williams explained.
Mr Williams added that the fund's managers, two of who are North American
specialists, one covering Asia and Europe, and one, Australia, offer complementary
investment approaches and blend a variety of investment styles.
"When combined, we believe this group of managers provides a more robust
investment approach and consistent performance profile than a single manager,"
he stated.
Russell’s 18 strong Real Estate team has approximately $5 billion of
assets under management on a global basis through its multi-manager funds and
discretionary separate accounts. Russell’s advisory services in this area
include asset allocation, strategic planning, investment research and selection,
performance monitoring and portfolio management.
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