New Star’s new international property fund will be the only UK onshore investment fund to include Asia and the Pacific Rim in its remit. With the significant exception of the United States, the fund’s investments will be worldwide*; it is being marketed as Eurasian. An added attraction is that the fund’s holdings will be directly in real estate rather than in property companies.
The New Star website lists five properties that it says are indicative of the kinds of property it will be bidding for. Three of these are European (in Amsterdam, Berlin and Munich), one is Japanese and the fifth is in Sydney. The fund brochure also lists properties in Hong Kong, Singapore and Melbourne in this context. The fund’s remit is exclusively commercial property. The fund won’t actually be able to invest in any of these properties until it’s launch phase target of £200m has been reached but with the base rate at 5.5% this could be said to be a good time for launch phases. The retail offer period closes on 4th June. Eventually, the fund aims to be 80% invested in particular properties. The balance will be held in (property) shares or REITs.
Most recently, New Star’s best performance relative to competitor funds has been with its New Star tech, New Star Diversified Absolute Returns and New Star Extra High Yield Bonds. Although fund managers Roger Dossett and Gregor Logan don’t seem to have much international property experience, Simon Tyrell and Robin Carr, both members of RICS, do bring plenty of international property experience to the fund.
Stuart Webstar MRICS will be joining New Star this month as head of international property. In addition to hoped-for capital appreciation, New Star project an income yield in the region of 4%, giving investors an additional reason to choose this fund for their next ISA selection. The quoted initial charge is 5% and the annual management charge (AMC) is 1.75% but some intermediaries will offer better deals. The fund’s advisers will be CB Richard Ellis for European property and DTZ for Asian.
In January Citywire reported that the FSA might thwart the new fund but last month the Telegraph reported that a modification to the rules had been granted to New Star by the regulator which allowed the fund to be structured in a tax-efficient manner.
Comment on the attractions of the fund includes Justin Modray of Best Invest who worried that the fund’s relatively small size will mean it’s investments will be thinly spread and that investing directly in properties could cause problems if one country’s property market turned sour. However, countries like Singapore and Germany can’t be faulted for their stability and the Australian market is definitely on the up. The Scotsman quoted Matthew Taylor of Mackenzie Taylor’s view that UK investors would find an overseas fund attractive after the excellent performance of UK property funds in recent years