Banque Privée Edmond de Rothschild and PI Performance SA (Geneva and Zurich), a member of the CB Richard Ellis Group, have joined forces to launch the first truly global property fund: the LCF Edmond de Rothschild Prifund Alpha Property Securities, a Luxembourg-based fund of funds which has just been authorized for distribution in Switzerland.
"For our private and institutional clients, property has always been an essential component when establishing a diversified investment strategy. This is because property only has a weak correlation with the other asset classes. In view of this stabilizing effect, the incorporation of real-estate assets thus significantly improves the risk-return profile," notes Alexandre Col, head of the Funds Department at Banque Privée Edmond de Rothschild.
For his part, Jean Golinelli, CEO of CB Richard Ellis PI Performance, emphasizes: "Global real-estate offers relatively high returns that are more stable than one would think thanks to its geographic diversification. Over the last three years stock market-listed property has achieved an average annual performance of 28.8%, thus outperforming the stock and bond markets. Hence the benefit of extending investment horizons."
As Alexandre Col points out: "It's true that the attraction of real estate in portfolio management is obvious. But subject to a number of essential conditions: that it is globally diversified, that it is invested in all the assets related to the real-estate sector and that one relies on locally-based managers."
And Alexandre Col adds: "As it happens, management of financial risks is our business, not to mention our 37 years' experience of multi-manager investment, while CB Richard Ellis, with its 356 offices around the world provides us with more than proven local expertise, including for the selection of local managers investing in a given market."
Jaume Sabater, Portfolio Manager of the Funds Department at Banque Privée Edmond de Rothschild, explains: "The theme of globalization is also a must for property. For two or three years now property has no longer been a matter of buying real estate for investment purposes within a radius of 200 km of one's permanent residence. Why should the property boom in Paris, London and Spain, or Asia's growth, be reserved only for those living in these regions? The development of financial investment tools means that to invest in property is also to invest in the property-related sector."
The geographic coverage of the Prifund Alpha Property Securities thus encompasses Europe, North America and developed Asia, while targeting, in a complementary capacity, certain high-growth Asian and European emerging markets with a dynamic demography. The fund also diversifies the types of property: offices, commercial premises, housing, hotels, land reserves, etc.
Above all, on the strength of the great experience that Banque Privée Edmond de Rothschild has gained in analysis and selecting fund managers, the Prifund Alpha Property Securities will be invested in a wide range of instruments, some of which will be aimed at achieving a return, others at capital gains: property investment funds (whether listed or not), property companies (whether listed or not), REIT's and ETF replicating a property index or a basket of property shares, but also property-related hedge funds or private equity funds.
In order to hedge against or even to take advantage of - any possible slides on certain markets, the proportion of hedge funds (in which Banque Privée Edmond de Rothschild was one of the pioneers) in the Prifund Alpha Property Securities will be allowed to amount to a maximum of 30%.
The originators of this property fund, with its relatively cautious strategy, think it should earn a return of 6% to 12% per annum, with a volatility of 6%. It will be accessible in euros, dollars and Swiss francs. Its management fees amount to 1.25% per annum, with a 5% performance fee.
About the originators
Banque Privée Edmond de Rothschild, which is listed on the Swiss stock exchange but c