Kames Capital has unveiled a new fund aiming to capitalise on current volatility within the UK property market. The closed-ended UK Active Value Property fund II is the second of its kind after its predecessor (UK Active Value Property) was launched in 2013.
It will continue the same investment strategy, by looking to exploit opportunities in the secondary commercial property market, with a focus on values between £5m and £15m. Kames believes these values could be too steep for private buyers. Although initially set up with a seven-year lifecycle, discretion lies with the manager to extend by a further two years and the fund will aim to raise £250m.
Philip Bach will take charge of the fund supported by the Kames property team, and will target a distribution yield of 6.5 per cent gross of the annual management charge paid quarterly.
www.kamescapital.com
Comment
The recent furore surrounding property funds has been one of the biggest talking points after Brexit. Several firms have taken action to either suspend trading or apply high dilution levies in order to protect existing investors from the potentially huge net outflows.
Due to its illiquid nature, property will always present an additional layer of risk, especially for investors looking to make panic sales. However, do these worries represent an opportunity for money to be made? Absolutely – it is often within turmoil that those brave enough to invest can take advantage of opportunities.
If there is one thing that is concerning, it is the lifecycle. Although seven years is a healthy length of time to ride out the volatility of property investment, falls (such as the 2008 crash) can be sharp, instant and take many years to recover.
The two-year extension should mitigate this, but the faint-hearted or risk-averse should consider other assets. The future of property is unknown post-Brexit and uncertainty could continue in the near future.
Property funds in general have seen net outflows every month during 2016. But the tide will turn at some point and, when they do, it is an asset class that will again produce consistently good returns.
craig.rickman@ft.com
