M&G Real Estate, the real estate arm of UK investment fund manager M&G Investments, is planning to launch a pan-European, long-income fund for institutional investors possibly as early as Q1 2016, PERE’s sister publication Real Estate Capital can reveal.
European Secured Property Income Fund (Euro SPIF) will be the first real estate commingled fund for nearly three years to be launched by the UK Prudential’s M&G Investments group, and is the second new product launched since Alex Jeffrey took over as chief executive of property in July 2012.
The last new vehicle was the UK Residential Property Fund, which began investing in mid-2013.
Euro SPIF will seek to build on the success of M&G’s UK product for investors looking to match pension liabilities with secure, inflation-protected long income, UK SPIF. That fund, managed by Ben Jones, has grown from a standing start in 2007 to £3 billion gross value by September 2015.
It seeks to return 4 percent over the UK retail price index and has comfortably exceeded that target over the last three years when it has returned 9.5 percent per annum.
It is thought that M&G Real Estate has an inaugural investment lined up for Euro SPIF, but that the acquisition is not yet completed. M&G declined to comment on the timing of any launch.
Like the other UK, European and Asian funds in the M&G Real Estate stable, Euro SPIF has been structured as an open-ended fund and will be euro denominated.
Jeffrey previously told Real Estate Capital there was a big opportunity to meet Euro investors’ requirement for long-term income to match their liabilities, and that “there are a lot of high-quality assets to go for.
“In building the UK SPIF portfolio, we had to manufacture most situations and leases by talking to occupiers, many of whom had never considered selling and leasing back properties. A similar approach will probably be of merit on the Continent,” he said.
M&G Real Estate bought and sold a total of £7.3 billion of bricks and mortar real estate in 2013 and 2014 and is on course to complete between £3 billion and £4 billion of deals globally in 2015. The business also works with the fixed-income-based real estate finance team under John Barakat which invests in property debt across Europe.
Jeffrey told Real Estate Capital that although M&G recognised there is increasing caution around record low yields in some UK and European property markets, the business had not had any buyers pull out of deals or seen pricing softening.