Heitman, the $27.8 billion US private equity real estate firm, has formed a strategic alliance with London-based Rogge Global Partners to launch a global real estate bond fund in a move to meet demand among global investors for fixed-income, inflation-protection assets.
The novel approach, which involves Heitman lending property asset expertise to the London-based fixed income specialist, will see the majority of the Short Duration Global Real Estate Bond fund invest mainly in commercial mortgage backed securities (CMBS). Although the fund will also have the capability to invest in real estate investment trusts (REITs), residential mortgage-backed securities (RMBS), homebuilders and other asset-backed securities (ABS), these asset types will form just a minority of the fund’s investment targets and are being offered only to add greater liquidity to the vehicle.
Both Rogge and Heitman are ultimately owned by South African financial company, Old Mutual, though this is the first time the pair have formed anything together. Investors in the open-ended fund will pay a single management fee to be split by Rogge and Heitman,
Maury Tognarelli, chief executive of Heitman, said in a statement: “We share a long history with Rogge and this gave us the confidence that collectively we could execute the strategy and deliver superior risk-adjusted returns to our clients.”
The two firms believe fixed income securities are “unique” in providing the “security and inflation protection characteristics” of real estate and the downside protection of fixed income assets. Olaf Rogge, chief executive officer of Rogge Global Partners, said the alliance and the emphasis on short duration and increased yield was already resonating with investors. Rogge will shape the portfolio strategy and geographic allocations while Heitman will provide a comprehensive review of global property fundamentals and valuations.
Asked about the competitive field, the company said London-based Cheyne Capital offered a real estate bond fund, although that is Europe-focussed. Rogge and Heitman have a global strategy but also expect the majority of investments to take place in Europe.
No target size was placed upon the portfolio.