European Investors Inc. has announced the launch of the EII Global Property Fund, an institutional-class US-domiciled mutual fund investing in REITs and other publicly traded property companies in Asia, Europe and the US.
The fund represents the first opportunity for US investors to access European Investors' global real estate strategy through a commingled fund. The firm already manages global funds in the UK, Luxembourg and Australia, however had previously only offered the global product to separate account investors in the US.
The announcement comes on the heels of the firm receiving top ratings for its US and Irish-domiciled international real estate funds. The EII International Property Fund was rated the top performing real estate mutual fund last year according to Lipper. The announcement also follows a record year for new funds offering global real estate strategies, driven in part by investor interest in an asset class that offers a low correlation to traditional equity and fixed income products. However, while many of the new funds are targeting the retail consumer, the EII Global Property Fund was specifically created to address demand from the company's existing institutional and investment advisor client base.
"As an investment boutique, our goal has always been to deliver superior real estate investment management services to a niche investment segment rather than building a large distribution base," says President and Co-Founder of European Investors, Christian Lange. "Our investor base in the US institutional and professional investors to a large extent has historically preferred to determine regional allocations. However, given the very local knowledge of property markets necessary to understand which regions and companies represent the best current opportunity, there is increased interest in 'outsourcing' the regional allocation to managers specializing in real estate."
The fund will be co-managed by Jim Rehlaender and Al Otero, Managing Directors and respective heads of the international and US realty securities research teams.
"Our global strategy consists of identifying undervalued companies poised for long-term growth. Outside the US, where the markets are much less efficient, this requires deep digging into firm financials and business strategies and often requires us to verify information with third-party sources such as brokers and tenants," Jim Rehlaender said. "While many overall markets are positioned to benefit from increased adoption of the REIT model worldwide, it's not a guarantee that all companies will do well in the long-term. Understanding the many factors that can influence a company's success is crucial and I don't think it's possible to do a good job unless you have experienced analysts in the field."
With respect to the US component of the strategy, Al Otero faces a different challenge. "In the current environment of strong returns and full valuations, it's important to understand which companies represent the most viable long-term opportunities in terms of the quality of real estate and management team," he stated. "Another challenge is that the relative maturity of the US market can lull investors into a sense of security regarding risk credit risk by borrowers and tenants, risk of increased operating costs due to a number of external factors, risk of oversupply and a tough competitive environment that comes with the lower barriers to entry for property development in the US."
The EII Global Property Fund seeks to exceed the FTSE EPRA/NAREIT Global Index and is allowed to invest up to 75% outside the US according to prospectus. The strategy is driven by bottom-up, fundamental research, however, and will not employ the top-down approach more typical of a benchmark-oriented strategy. The fund will trade under the ticker symbol EIIGX.
Source: European Investors Inc.