Iain Reid, former chief executive of Aberdeen Property Investors (API), has announced his return to the real estate arena with the launch of a new firm, Protego Real Estate Investors, in partnership with the wealthy Norwegian shipping and oil family Smedvig.
The deal ends months of speculation about Reid’s intentions after losing his job at API last August when a proposed deal to sell the company to British Land fell through.
Reid has set up the real estate management side of the business, which will focus on indirect property funds and property derivatives, with former
colleagues, Charles Weeks and Hugo Llewelyn.
He says both Smedvig, which is headed by London-based Peter Smedvig, and the founding partners have put money into the business to fund what he says will aim to be “a substantial business” rather than a boutique house.
Subsequently, Reid says the firm will recruit more staff shortly and seek to broaden an initial UK focus into Europe “pretty quickly”, probably in the Netherlands and Sweden.
In terms of client focus, Reid says Protego, which means ‘to protect’ in Latin, will target both high net worth individuals and institutions, albeit starting with the former to launch the business. “In some ways institutional and private are becoming much closer and most of the things we do will eventually be available to both.”
Aside from the funds side of the business, Reid sees strong potential in the property derivatives field, such as index certificates and property forwards: “They’re things we’ve done in the past but from a constrained market place, which was really pension funds. “Recent changes in the FSA view of derivatives and their admissibility for insurance companies are changing the playing field considerably.”
More specifically, however, the name Protego indicates the firm’s product approach for private investors – focusing on low risk and limited gearing - an institutional type arrangement.
Hugo Llewelyn explains: “The high net worth part of the market is a massively growing sector of the investor universe who were previously investing in very highly geared funds that did well in a rising market.
“ We think, however, that there are opportunities to have a lower risk product, with say only 50% gearing, and much more active management buying assets for private investors, which are longer term and less risky, in the same way as you do for institutions.
“In addition we’re offering high quality reporting to clients.”
Regarding Smedvig’s interest in the firm, Reid notes that the Smedvig family has property interests in Norway that it will continue to manage locally.
“The reason for this venture is that they would like to diversify their property interests across the rest of Europe, both by buying the interest in Protego and by supplying capital to co-invest with clients of ours in funds and property deals. We won’t be managing their money separately.”
Reid notes that he was in discussion with a number of asset management firms before the Smedvig deal: “We got into quite detailed discussions with a number of parties and I was developing a business plan while extricating myself from Aberdeen.
“However, while it’s quite seductive to go to an asset management company with a great brand that wants to build up a real estate arm, it cuts down your independence, flexibility and who you can deal with, as well as the control of the company. You’re also vulnerable to the management structure of the company you join with.”
The Smedvig deal, he says, offers the independence and stability to build a firm outside of the traditional fund manager sphere.