Euromoney Liquid real estate March 2007
Banque Privée Edmond de Rothschild has teamed up with real estate specialist PI Performance to launch what it is calling the “first truly global property fund”. The LCF Edmond de Rothschild Prifund Alpha Property Securities is a fund of funds based in Luxembourg. The Swiss bank has been authorised to distribute the fund in Switzerland.
In light of swiftly growing levels of investment and opportunity in global real estate markets, the launch could be considered timely. Some estimates point to as much as $6 trillion in investible real estate worldwide. Banque Privée Edmond de Rothschild will seek to maximise gains through a broad exposure to this market.
That is easier said than done. Real estate markets are highly localised. Supply is mainly driven by local fundamentals, and there is little correlation between different regions. Added to that are the usual difficulties concerning tax and legal structures.
How, then, to overcome these obstacles? This is where the collaboration with PI Performance is critical. The two companies will jointly select fund managers with local knowledge key to successful property investment.
“We believe this is an excellent structure for the real estate field,” says Stephane Ensini, head of marketing at Banque Privée Edmond de Rothschild. “Real estate is obviously very localised, so to employ local managers to work in local markets makes sense.”
There may be some contention, however, over whether the fund is in fact a truly global.
Research by the University of Reading in the UK concluded that a reasonably diverse global property fund would require an initial investment of at least $100 billion. Banque Privée Edmond de Rothschild in total manages only around $60 billion.
Whether or not the bank can uphold its lofty claim, it is a highly diversified fund. It will invest in direct, listed and alternative real estate funds. Its core regions of investment will be Europe, the US and developed Asia, but it will have presence in emerging markets in Europe and Asia. The types of property are also diverse, including offices, housing, hotels, commercial properties and land reserves. It can at least claim to be one of the most global.
“We looked at the products being offered in real estate markets, and while there are some property funds of funds, there is none that offers such diversification worldwide in terms of property types and management styles,” says Ensini.
Banque Privée Edmond de Rothschild expects annual returns to be between 6% and 12%. The fund already has a limited track record, having been launched in Luxembourg last year, returning 5.2%. Truly global or not, it is likely to return comfortably within the target range.
