SLI launches two new property funds aimed at UK and Europe

STANDARD Life Investments has launched two funds which will invest in global property stocks and real estate investment trusts (REITs) and is aimed to deliver direct property returns in the long-run.

On the back of its highly successful Select Property Fund, the Edinburgh-based investment house is tapping into the REIT market with the launch of the Global REIT Fund for UK investors and the Global REIT Focus Fund primarily aimed at the European markets.

The two funds will invest mainly in tax-efficient REITs or companies dealing in the property market globally. Both will aim to outperform the FTSE EPRA/NAREIT Global Index by 2 per cent a year.

Fund manager Andrew Jackson said, although he does not expect the two funds to attract the 1 billion the Select Property Fund brought in during its first 15 months, he is hopeful they will receive between 100 million and 200m each in the first year. Jackson added the timing of the launch had nothing to do with the recent introduction of tax-efficient REITs in the UK, which has generated considerable publicity and is seen attracting fresh investment to the sector.

"We're not looking at the UK through rose-tinted spectacles," he said. "The UK is moving towards the end of its property cycle and returns will slow to low single-digit returns in the next two to three years."

Instead, Jackson said the two funds will give investors the means to gain exposure to listed property assets beyond Britain and Europe, where he saw better returns and better prospects - especially in the Asia-Pacific region. If need be, the funds could pull out of some individual markets altogether, he said.

"If we see no value in a particular country, it might be the UK, which is looking like it might be heading for a fall in a few years' time, we will come out completely," he said.

According to Jackson, investors' appetite for commercial property investment remains high despite the good run over the last three years but warns them to look outwith the UK for superior returns.

"The UK has had a very good run," he added. "We are not viewing the UK through rose-tinted spectacles - it isn't going to produce returns over the last few years going forward.

"Our advice to property investors is to start to diversify. We do not expect the UK to collapse, but we do expect returns to fall into single-digit levels."