This blessed plot

Private equity real estate has earned grudging respect from investors as an attractive alternative investment class now that billions have been poured into the sector. It also enjoys a royal seal of approval in the UK, where the Queen of the United Kingdom is beginning to allocate significant capital to property funds. Her personal finances are administered by the Duchy of Lancaster.

For 700 years, the British monarch has been an active investor in real estate, of course, and that is not counting entire subcontinents, the royal palaces of Balmoral and Sandringham, or stud farms used for breeding racehorses.

Over the course of seven centuries, the Duchy of Lancaster has set about amassing 18,700 hectares of land in England and Wales: most of it is rural, but some of it includes development sites and urban estates, the most valuable of which is the Savoy Estate off The Strand in London's theatre land.

Up until recently, though, the Duchy had invested precisely zero in indirect property. However, in a mark of how the industry has grown up, that changed in 2003 when the Queen invested in a little known vehicle called the Osprey Fund. Osprey is a £300 million commercial property fund set up by a London-listed firm called Teesland in 2002 to buy small lots of offices, retail and industrial property. This was then followed up in 2006 by a £10 million investment in a vehicle run by Palmer Capital Partners, a venture capital firm specializing in backing start-up property companies.

Now things have gotten really interesting. Just as every other institutional investor has diversified out of their domestic market, so the Queen has decided to follow suit. It was revealed at a property trade show in Munich last month that Her Majesty has agreed to invest in Palmer Capital Partners' latest venture – a European version of its UK model (see p. 17). When the platform begins investing, she will receive profits from developments and investments identified by thrusting young property entrepreneurs across the Continent.

Given that her predecessors once owned, as it were, considerably more foreign land, the decision by the Queen to invest outside England and Wales is perhaps not that surprising. Nevertheless, it must be gratifying for a GP to know his fund has received royal recognition. Of course, if the venture were to fail, there may be serious consequences. Public executions at the Tower of London on the orders of the King or Queen ended some centuries ago, but one wonders if the current monarch might reverse this policy if the directors of Palmer Capital Partners fail to bring home adequate spoils.