The ink has hardly dried on the merger between BlackRock and Merrill Lynch Investment Managers, but the combined firm has already announced the launch of a new commercial property fund product. Merrill Lynch has a number of real estate fund products, including the two-year-old UK Fund of Funds and the Merrill Lynch Property Fund, known post-merger as the Blackrock UK Fund, which manages $3 billion (€2.3 billion) of investments. But in the wake of Merrill's merger with the global investment manager, it has now launched a European Property Fund of Funds, which aims to grow assets under management to between €500 million and €1 billion in the next two to three years.
Matthew Ryall, who is managing the fund, said it is the sister product to the firm's UK Fund of Funds. The new open-ended vehicle will be euro-denominated and will invest in unlisted private equity real estate funds predominantly outside the UK, in the European economic areas and Switzerland. The focus of the vehicle will be core and core-plus investments.
“There has been an explosion of private equity real estate vehicles which has meant that investors can invest in local markets and gain exposure to diverse portfolios,”Ryall said.“The momentum and scale of growth creates numerous investment opportunities for the fund,” adding that the team is looking at three or four new funds a week.
“We look top down and bottom up, but the most important thing is getting a good manager,” he said. The fund of funds team comprises six people, but there is also a “bench” of advis0rs providing advice on country-specific, tax and legal issues. “We sit between the BlackRock real estate team, which has one of the longest-established UK teams, and the private equity side,” said Ryall.
Fund of fund products are becoming more popular as institutions and private investors look for exposure beyond their domestic markets, especially in Europe. A number of firms have recently set up fund of fund vehicles in the region, including Aberdeen Property Investors and Composition Capital.
“Unless you are a very large investor you will not have the know-how, finance or capabilities to invest in every single market,” Ryall said.