BlackRock's Real Estate team has launched the Merrill Lynch (ML) European Property Fund of Funds to invest in unlisted diversified property vehicles across Europe. The Fund will give institutional clients access to the best property managers across a range of markets throughout Europe.
BlackRock's Real Estate team has been investing in indirect (property mutual funds) and direct (ownership of real estate) property on behalf of clients for over 25 years. It now manages a global platform of €13 billion in private real estate investments. The European Property Fund of Funds, an open ended euro denominated vehicle, will be managed by Matthew Ryall.
As the merits of property are reassessed, cross border investing is becoming more popular with investors as they seek to invest outside their own market and increase the size of their property exposure. One of the most efficient ways of gaining access is by investing in specialised local funds, via a fund of funds vehicle.
Direct access to the European property market can be difficult given its size and fragmented nature. In response to growing investor demand, the indirect market in Europe has seen a significant increase in the number of unlisted real estate funds. The momentum and scale of growth creates numerous investment opportunities for the Fund. Furthermore, within the individual countries across Europe, real estate markets can perform quite differently at any one point in time, thus increasing the diversification benefits.
Matthew Ryall, fund manager of the ML European Property Fund of Funds, commented: "The European Property Fund of Funds will provide clients with exposure to the best property managers across Continental Europe and the powerful diversification qualities of real estate in different markets and regions."
"Our initial investment focus will be in those property markets which we see as being relatively undervalued and with good growth prospects going forward. These include the Nordic countries, provincial France, Western Germany and parts of Southern Europe. We will be limiting our exposure to many parts of Central Eastern Europe, where we believe that current pricing levels are not supported by growth prospects."
"The Fund will invest in a range of property types, countries and investment styles across Europe. In particular we will invest in the managers who specialise in local property funds, to give investors the best access to European property."
In assessing the suitability of individual funds, strict qualitative selection criteria will be adopted which include ratings of management teams, investment processes, corporate governance and the quality of underlying assets. Consistent fund performance and satisfactory liquidity will also be sought but are not prerequisites initially, given the immaturity of many real estate markets in Europe. Once the European Property Fund of Funds invests in a fund, it will be reviewed in a systematic manner with regular, face-to-face meetings with management to discuss performance. The European Property Fund of Funds complements the successful UK Property Fund of Funds that was launched in 2004.