Specialist derivatives fund manager Reech Alternative Investment Management has reported that its Iceberg Alternative Real Estate Fund, a European real estate relative value fund, has deli
Specialist derivatives fund manager Reech Alternative Investment Management has reported that its Iceberg Alternative Real Estate Fund, a European real estate relative value fund, has delivered a return of 29.12 per cent net of fees between its launch in May 2007 and the end of April, including performance of 0.87 per cent last month and of 4.09 per cent for the first four months of 2008.
A joint venture between the world’s largest commercial real estate services firm, CB Richard Ellis Group, and Reech AiM, Iceberg Alternative Real Estate invests in a range of financial instruments with exposure to real estate assets including listed securities, unlisted real estate vehicles and property derivatives.
Employing multiple strategies and using up to two times leverage, the Iceberg Fund targets a return to investors of Libor plus 15 per cent with annual volatility of 10 per cent, irrespective of the direction of the underlying real estate markets. In fact, the fund’s volatility of less than 7 per cent over its first 12 months is lower than most conventional long-only real estate funds.
‘Despite the more challenging investment market for real estate throughout the 12-month period in which Iceberg has been operating, we have been particularly well placed to benefit as a relative value market-neutral fund,’ says Reech AiM’s chief executive Christophe Reech. ‘We have been successful by capitalising on periods of uncertainty and volatility in the market with out-performance driven primarily by value realisation throughout the year.
‘One of the key components of Iceberg has been the technical and technological sophistication we have developed through our derivatives research modelling. This, coupled with the real estate knowledge and insight of our joint venture partner, CB Richard Ellis, has given the fund a clear advantage throughout a difficult market, especially at a time when specialist financial institutions are increasingly accessing the property derivatives market.’
The emergence in recent years of an increasingly liquid market in real estate index derivatives, usually in the form of IPD swaps, has been an important development in facilitating the introduction of relative value methodologies to the real estate industry, Reech says.
Iceberg makes significant use of real estate derivatives, through which it takes real estate positions alongside all of the other available forms of indirect real estate risk in the UK and continental Europe.
Fund manager Stephen Ashworth is optimistic about the fund’s ability to generate similar returns going into its second year. ‘The market environment today contains many features which will play well to Iceberg’s strategies – uncertainty around future returns and valuations, price volatility, and an increasing focus on fundamentals,’ he says. ‘These, coupled with still growing investor interest in real estate as an asset class, means Iceberg has an increasing opportunity set from which to pick appropriate strategies.’
Established in April 2006, Reech AiM offers investors including institutions, high net worth individuals, charities, endowments and foundations a diverse range of active quant and alternative investment strategies, providing access to emerging asset classes as well as greater liquidity and scalability in hedge fund-style investments.
