London-based Pacific Real Estate Capital Partners has launched an alternatives platform, with the first fund being The Liquid Property Fund.
The firm, which was set up by Sir John Beckwith and Gerald Parkes last year, has opted to set up the unleveraged global vehicle to invest in “liquid” investments such as property equities, property debt in the form of commercial and residential mortgage-backed securities and derivatives on property indices.
Pacific's decision to set up an alternatives division follows on from the creation of a direct property vehicle last year called the Absolute Return Fund, which is designed to invest predominantly in core sectors of office, retail, warehousing, industrial and residential.
Beckwith is a veteran UK property entrepreneur, who among other things established pan Europe private equity real estate firm, Europa Capital Partners.
Co-founder Parkes was formerly head of private equity real estate in Europe at Lehman Brothers.
Pacific said today that its first alternatives offering would be managed by Steven Grahame, who was formerly chief investment officer of Hermes Real Estate Alternatives and prior to that a consultant at Towers Watson responsible for real estate. It will also be managed by Toby Hayes, who has joined from boutique multi-asset investment firm, Armstrong Investment Management.
In a statement, the firm said Grahame and Hayes had been charged with growing Pacific’s real estate alternatives business to “capitalise on investors’ growing demand for investing in non-traditional, more liquid real estate investment”.
The Liquid Property Fund will be open-ended, investing in domestic and international markets, and will not charge a performance fee.
Grahame took the launch of the fund as a chance to say that investors had experienced “significant frustration” with the “poor performance” of many direct real estate property investment vehicles. He said: “Having worked closely with chief investment officers and trustees of many pension plans, it has become increasingly evident that there is significant frustration with the poor performance of many direct property investment vehicles, the high cost of buying and selling direct real estate, the lack of liquidity in most funds and the lack of real diversification.”
He went on to say the complaint from property investors was they had to pay active management fees for strategies that were little more than “buy and hold”.
He added: “These issues were compounded when some of the open ended balanced funds were closed to redemptions or suspended trading in units, forcing investors to endure illiquidity traps.” He also said the decision not to charge a performance fee would suit institutional investors, particularly defined contribution pension funds and sovereign wealth funds, who want to gain access to property market “efficiently”.
Pacific’s Parkes called the present market “challenging”. “Many economies are still fragile and many investors, especially the smaller ones, are looking for alternative ways to invest their capital to achieve a high quality, low volatility income stream.”
Meanwhile Beckwith said his approach to investing had been to identify talented individuals, remove distractions and ensure that a fund manager was aligned with investors.