Schroders launches European funds of property funds

Schroders has launched two European funds of property funds, enabling investors to diversify property holdings beyond their domestic national markets, the firm said yesterday.

Schroders has rolled out European Fund 1, which invests in property across Europe, and Continental European Fund 1, which excludes British real estate.

The continental European real estate market is about three times the size of Britain's, so the fund-of-funds model gives investors the ability to tap a bigger big range of assets for less risk than through a single portfolio, Schroders said.

Schroders said it had already secured more than €100 million of commitments from investors.

The Luxembourg-domiciled products are structured as closed-ended funds with fixed life-spans. Each fund will be restricted to €250 million.

"We deliberately chose a close-ended structure as we felt open-ended vehicles provided very limited liquidity at the expense of investment return and the interests of the long-term holders," Mike Clarke, Schroders head of property distribution, said.

Private property funds generally are seen as less susceptible to stock market sentiment than listed property companies, including tax-efficient real estate investment trusts (REITs), but are also widely regarded as less liquid.

"Instead, we aim to operate a secondary market for units in the fund in the same way that we have pioneered for our UK fund range where we have traded over one billion pounds in the three years to December 2005," Mr Clarke said.