LaSalle Investment Management, the Chicago-based real estate investment management firm with approximately $40 billion of assets under management, has co-launched a new business line in real estate derivatives.
The firm has launched its derivatives platform in partnership with BGC Partners, a New York-based financial brokerage firm.
In an announcement on the tie-up today, LaSalle said it would originally service clients using the UK derivatives market but, over time, would expand geographically.
The firm said: “Together with BGC, LaSalle will embed the end-to-end systems and processes to empower LaSalle’s fund managers to identify value and then execute and monitor trades.”
LaSalle said it saw ‘clear long term benefits to clients by facilitating access to property derivatives’ as a means to enable its clients to ‘tilt’ their portfolios towards favoured sectors or away from sectors expected to underperform in the short-term.
LaSalle's paltform enables its owner Jones Lang LaSalle to join a number of other property services firms, including closest rival Richard Ellis, in providing such a service.
Generally regarded a short-term hedging tool, real estate derivates are often used by fund managers to address overweight exposures to sectors without selling assets. Trades are agreed on future performances of assets and can be determined both on positive outcomes and negative outcomes.
LaSalle said interest in property derivatives is growing although acknowledged that Q4, 2010 saw a decline in activity driven by increased activity in ‘physical property market’ investments and uncertainty about regulatory change.
According to the Investment Property Databank (IPD), 36 percent of delegates polled at one of its recent briefings said they would consider using real estate derivatives this year.
Alan Tripp, UK managing director, LaSalle Investment Management said: “We do not believe that property derivatives will replace investment in direct real estate but rather that they will equip fund managers with another risk and portfolio management tool. There appears to be appetite for this sort of diversified strategy. The market is developing, and we want to offer our clients the ability to access this market as and when appropriately priced opportunities arise.”