Merrill targets £500m for property fund of funds

News

Robert Gibson

01 May 2004

Merrill Lynch Investment Managers is to launch a property fund of funds that it hopes to develop to around £500m over the next five years.

The Merrill Lynch UK Property Fund of Funds will provide exposure to UK commercial property by investing in other funds. It will be similar to ING’s Osiris and Schroder’s fund of funds.

Ian Mason, head of MLIM’s real estate team, said: “Our recent analysis of the risk, return and diversification benefits of property has suggested that long-term investors in this sector should increase property allocations to 10-15%.

“One route for achieving this would be investing in a single property fund. However, feedback from some clients has indicated that they want greater fund diversification.

“An ideal starting point for these more cautious investors is the Merrill Lynch UK Property Fund of Funds.”

Paul Taylor, a director in MLIM’s real estate team, said: “We planned on launching it when we had commitments of £50m but ongoing negotiations have already pushed it well past that mark. We see it growing to £500m over the next five years.”

It will be structured as an offshore unit trust, mirroring the £984m Merrill Lynch Property Fund founded in 1982, which became Jersey-based in February 2002.

Taylor said the selection of funds would vary over time. But 70% of the fund will aim to give general exposure to the UK market through three core funds, including an exposure of up to 35% in MLPF. He listed Deutsche’s UK Managed Property Fund, Henderson’s UK Property Fund and UBS’s Triton as other potential candidates.

Up to 30% of the remainder will be invested to deliver enhanced sector-specific performance in limited partnerships like Pillar’s specialist retail park fund Hercules or Ashtenne’s industrial fund.

The smallest investment is £250,000 officially, but there is managers’ discretion for a minimum stake of £25,000. It will levy an annual management fee of 0.2% calculated on the net asset value. Taylor is predicting returns of 10% this year and an average 7.5% over the next five years.

Taylor said: “It will launch covering office, industrial and retail, but will be structured to have the flexibility to be able to include residential, leisure or overseas property if appropriate in the future.”

Merrill Lynch Investment Managers is to launch a property fund of funds that it hopes to develop to around £500m over the next five years. The Merrill Lynch UK Property Fund of Funds will provide exposure to UK commercial property by investing in other funds. It will be similar to ING’s Osiris and Schroder’s fund of funds. Ian Mason, head of MLIM’s real estate team, said: “Our recent analysis of the risk, return and diversification benefits of property has suggested that long-term investors in this sector should increase property allocations to 10-15%. “One route for achieving this would be investing in a single property fund. However, feedback from some clients has indicated that they want greater fund diversification. “An ideal starting point for these more cautious investors is the Merrill Lynch UK Property Fund of Funds.” Paul Taylor, a director in MLIM’s real estate team, said: “We planned on launching it when we had commitments of £50m but ongoing negotiations have already pushed it well past that mark. We see it growing to £500m over the next five years.” It will be structured as an offshore unit trust, mirroring the £984m Merrill Lynch Property Fund founded in 1982, which became Jersey-based in February 2002. Taylor said the selection of funds would vary over time. But 70% of the fund will aim to give general exposure to the UK market through three core funds, including an exposure of up to 35% in MLPF. He listed Deutsche’s UK Managed Property Fund, Henderson’s UK Property Fund and UBS’s Triton as other potential candidates. Up to 30% of the remainder will be invested to deliver enhanced sector-specific performance in limited partnerships like Pillar’s specialist retail park fund Hercules or Ashtenne’s industrial fund. The smallest investment is £250,000 officially, but there is managers’ discretion for a minimum stake of £25,000. It will levy an annual management fee of 0.2% calculated on the net asset value. Taylor is predicting returns of 10% this year and an average 7.5% over the next five years. Taylor said: “It will launch covering office, industrial and retail, but will be structured to have the flexibility to be able to include residential, leisure or overseas property if appropriate in the future.”