£1.7bn open-ended fund investing in UK property closes to protect investor returns
UBS Global Asset Management is to close its UK £1.7bn open-ended fund Triton for an indefinite period, because it cannot source enough product to meet investor demand. It hopes the move will protect investors’ returns from the potential dilutive effects of cash and valuation lags in the current hot investment climate.
“We simply cannot buy-in the kinds of quantities of properties at the price that we would want to pay. And we did not want to become asset gatherers and compromise our investment style,” managing director, UK property Cliff Hawkins said.
The fund manager is concerned about the cash-lag effect with the fund having surplus cash, which it cannot invest in property, pulling down total returns. It is also worried about the valuation lag effect. As new properties are valued immediately at market price in a rising market existing properties outperform new properties as their values catch up.
This reduces the aggregate capital growth of the portfolio as a whole where a large number of properties have been recently purchased. Triton, which has grown from £800m since the end of 2003, has taken in £180m from investors since February, and still has £300m left to spend.
Hawkins said a stop would go on new subscriptions that began at the start of July. Triton will re-open at “the fund manager’s discretion”, he said.
Hawkins, who said Triton had been on track to take in “hundreds of millions” before the end of the year, added: “A lot of money is still chasing property… so that even poor quality properties are pushed to prices that are just not right for our style.
