UK – Standard Life Investments is to launch a UK commercial property income fund, underpinned by a portfolio of properties let on long leases. The fund is targeting an annual gross dividend yield of 6.5%, and is estimated to reach 250 million pounds (394 million euros) in size when launched at the end of December.
The fund will be a Guernsey-based investment company, and will be quoted on the London Stock Exchange, and will be available to both retail and institutional investors, including investment trusts. The portfolio will be diversified by sector and will invest 53% in the office sector, 18% in retail and 29% in industrial property.
Says Andrew Jackson, investment director of property at Standard Life Investments: “Many investors are sitting on cash holdings earning low rates of interest and this fund presents an alternative which provides a higher running yield, combined with the prospect of potential capital growth from the underlying property portfolio.”
Credit Suisse Asset Management (CSAM) has also highlighted the importance of UK commercial property as an asset class. The sector has outperformed other classes over three, five and 10 years, and “should be considered a core asset class,” says CSAM. UK commercial property returns for 2002 are forecast at 9%.
“If UK commercial property can overcome the reluctance by asset allocators for weightings to float within a prescribed band, rather than seek to dispose of property if the stock market falls, then property really will be a core component,” believes Glenn Newson, head of property at CSAM.