Russell Investment Group (Russell) has launched its first Global Real Estate Securities Fund for European clients.
In a related move, the firm has appointed Derek Williams to the newly created position of senior research analyst for real estate in Europe.
The Russell Global Real Estate Securities Fund offers investors access to a growing asset class through a liquid, regionally diversified vehicle. Benchmarked against the FTSE EPRA/NAREIT Global Real Estate Index, the fund is available in Euro and Sterling hedged share classes.
In his new, London-based role, Derek Williams will be responsible for private and public real estate securities manager research in Europe and back-up portfolio manager responsibilities, reporting to Karl Smith, Director, Real Estate, based in Tacoma, US. Derek joins Russell from Land Securities plc, the largest real estate company in Europe, where he was head of research.
The 2005-2006 Russell Survey on Alternative Investing found that European institutional investment patterns in real estate are changing rapidly. Since 2003 there has been a 24 per cent up-tick in indirect investment versus direct investments in land and buildings. This growth is chiefly attributable to increased use of core funds and public real estate securities.
"Historically, direct investing was the primary route to real estate exposure," says Karl Smith, director, real estate. "However, the market has changed dramatically in recent years with the growth of tax-efficient vehicles such as REITs or REIT-like structures. Global real estate securities today constitute around 10 per cent of a USD 5 trillion global institutional real estate universe. This growth in demand for indirect investment vehicles was instrumental in our hiring of Derek, to help us more directly meet the specialised investment needs of both our European and non-European clients that are seeking investment opportunities in Europe.
"REIT legislation pending in a number of EU jurisdictions and expected to feature in the forthcoming UK pre-budget report will no doubt lead to continued strong growth in real estate investing. The availability of REITs will also change the way people invest in property. Institutional investors have diversified their equity exposure internationally for years, but most have limited their property exposure to the domestic market.
"Global real estate securities funds offer a level of geographic diversification absent from most direct investment strategies. Our global approach offers investors the opportunity to significantly reduce single market risk and volatility by diversifying out of their domestic market.
"Given recent market experience and lower expected equity returns, investors are looking to alternative asset classes to provide a diversified source of return. Since rental contracts are typically medium to long term and are either directly or indirectly linked to inflation, investors typically gain exposure to higher yields with little correlation to 'normal' equity and bond return patterns. This approach is also much less capital-intensive than direct investment, making the asset class available to many smaller investors for the first time.
"The managers in the fund offer complementary investment approaches, blending a variety of styles and market environments. "Two of the managers are North American specialists, one covers Asia and Europe, and one, Australia. When combined, we believe this group of managers provides a more robust investment approach and consistent performance profile than a single manager."
Russell's real estate group has a 30-year heritage providing both discretionary and non-discretionary services to leading institutional investors. Russell's 18 strong Real Estate team has approximately USD 5 billion of assets under management on a global basis through its multi-manager funds and discretionary separate accounts. Russell's advisory services in this area include asset allocation, strategic planning, investment research and selection, performance monitoring and portfolio management.
Background notes: Russell Investment Group, a global leader in multi-manager investment services, provides investment products and services in more than 39 countries. Russell manages nearly USD 150 billion in assets, of which USD 48 billion is managed from Europe, and advises clients worldwide representing more than USD 2.3 trillion.
Founded in 1936, Russell is a subsidiary of Northwestern Mutual and is headquartered in Tacoma, Wash., with additional offices in New York, Toronto, London, Paris, Singapore, Sydney, Auckland and Tokyo.
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