UBS considers joining peers in Eurozone fund party

UBS Asset Management is planning to fill a gap in its global real estate products by launching a pan-European open-ended fund, EuroProperty has learned.

UBS AM’s real estate & private markets (REPM) division has for many years managed a US evergreen vehicle, the $23.5 bn (€20.6 bn) UBS Trumbull Property Fund, and the £964 mln (€1.1 bn) UK open-ended Triton fund. But unlike a rapidly growing number of its peers it does not have a pan-European equivalent.

A source at the company said UBS REPM is ‘at the concept phase’ of designing the vehicle. It would likely be led by Mark Gifford, REPM’s head of European transactions.

In the last six months, at least three other global asset managers have launched open-ended Eurozone balanced funds for institutional investors.

In September, BlackRock Real Assets said it had received €280 mln of first close commitments for Eurozone Core Property Fund. In December, Thomas Kallenbrunnen joined PGIM Real Estate in Europe to head its European core diversified real estate strategy. And in October EuroProperty revealed that Morgan Stanley Real Estate Investing (MSREI) was planning an evergreen core/core-plus fund.

These follow an earlier wave of product launches by rival global managers which began in 2016 and which have seen substantial capital inflows. Principal among them are AXA IMRA’s CoRE Europe, which has been deploying at the rate of €700 mln a year, Nuveen’s European Cities Fund, and Barings’ European Core Property Fund, which had attracted more than €1 bn of equity a year or so after launch.

By mid-2018, MSCI’s Pan-European Property Fund Index had grown to €21 bn, double its size in 2015.

Sources say that managers are responding to investor appetite for pan-European diversification and core, long-term stability and income. The products are also a continuous source of fee income for the managers.

Newcomers have a lot of catching up to do with the first wave of funds established in Europe. The largest is believed to be CBRE Global Investors’ Pan-European Core Fund, which had reached about €5 bn in value by the end of 2018. The second and third largest are Invesco’s Real Estate European Fund and M&G Real Estate’s European Property Fund.

UBS REPM’s last European product launch was a UK long-income fund, which began investing last year.

REPM, headed in the UK by Howard Meaney, seeks to distinguish its long-income fund from others in the market in several ways. The fund targets a slightly higher return, of 5%, but its 15-20-year lease profile offers slightly shorter-term income than some rivals.


This story first appeared in EuroProperty, PropertyEU's sister publication


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