As part of the goal of Dutch metal schemes PMT and PME to increase their exposure to residential real estate from 25% to 45% by 2025, its asset manager MN has invested €400m into M&G’s European living property fund.
According to Joep Barten, a real estate portfolio manager at MN, the two metal sector schemes have a preference for residential real estate because of the relatively stable rental income from this sector.
He said: “This tends to be more solid than is the case for retail and offices because the risk of vacancies is lower. The price development of housing is also less volatile, especially over longer periods of time.”
The new M&G fund, which targets student housing, single and multi-family housing and retirement living assets, has so far invested €75m to buy 124 premium serviced apartments in Finland as its first investment. The recently refurbished Art Nouveau building home is located in central Helsinki.
MN was already invested in three European residential real estate funds. However, the pension asset manager sees the investment in the new M&G fund as an “additional diversification because this fund will also invest in accommodation for students and retirees. Our other residential funds have limited exposure to these segments,” said Barten.
He added: “By increasing exposure to residential real estate in Europe, we aim to secure long-term returns for our clients PMT and PME. The focus on sustainability and the fund manager’s long track record played an important part in placing this newly committed capital.”
M&G’s head of European residential, Marcus Eilers, will lead the expansion into the European living sector. The latest strategy expands M&G’s residential capability and European property fund range, building on the manager’s €1.5bn UK living strategy.
The M&G Real Estate European living fund wants to grow to a size of several billion euros, according to fund manager Alex Greaves, focusing on students, starters, working families and the elderly. It targets a net return of 5-7% per year.
According to MN’s Barten, the fee that is paid to M&G depends on the size of the commitment made, and is “much lower” than the 0.8-1.2% fee that large European real estate funds normally charge.