LaSalle IM launches property derivatives business
GLOBAL - LaSalle investment management is to set up a property derivatives business for its pension fund clients.
The company, which manages assets worth $40bn (€28.6bn), will set up the business as a joint venture with brokerage BGC Partners.
BGC trader Charles Ostroumoff told IPE Real Estate that LaSalle's new business was a "very significant move" in the development of the UK's five-year-old property derivatives market.
"Once the market is fully developed, you will see derivatives of all sorts of things - rental values, for example - depending on what property people want," he said.
Low derivatives volumes over the last couple of quarters had been disappointing, but "not anything to get too concerned about", he added.
Last year was the slowest for the derivatives market in its short history.
Interdealer ICAP blamed the slow pace of market development for its decision - announced last week - to pull out of the UK property derivatives market.
Ostroumoff pointed to a number of advantages for pension funds investing in derivatives - including the ability to hedge exposure to physical property and to rebalance portfolios without the need to divest assets that could provide a return-on-investment in the long term.
He added that LaSalle had embedded the property derivatives lifecycle within the company - in contrast to investment management firms that explored derivatives using a gatekeeper model, which he said had not worked because it lacked significantly involved fund managers.
"If you're serious about derivatives, the top-down way LaSalle has done it is the only way to do it," he said. "Without management buy-in, it's just another idea sitting at the edges."