Axa IM fund mimics direct property return

AnalyticsAxa Investment Managers has launched a fund that aims to return the same as unlevered direct property investment but which also offers investors daily liquidity.

The global property fund will invest in listed equity and debt instruments from real estate companies to offer liquidty that is not offered by direct property investment.

Axa’s WF Global Flexible Property Fund, a Luxembourg Sicav, splits its allocation 60% equity and 40% debt to mimic the liability side of a property firm’s balance sheet. Mimicking the balance sheet should return a similar amount to unlevered direct property.

However, the manager has the flexibility to change the asset allocation mix of the fund and reduce or increase equity exposure according to the property cycle, with the aim of reducing overall volatility.

The fund has a dedicated team of people who work for Axa IM and its subsidiary Axa Real Estate. Axa Real Estate is Europe’s largest real estate portfolio and asset manager, according to industry figures from Inrev, a trade body, and quoted by Axa IM.

Frederic Tempel, global head of listed real estate at Axa IM and lead manager on the fund, says investors have previously had to choose between illiquid physical real estate on one hand, and liquid yet often volatile real estate equities on the other, but this fund offers an alternative with better liquidity and reduced volatility compared to equity markets.

“Mixing real estate equity and debt instruments in one liquid strategy is a relatively recent investment opportunity. The disintermediation of banks following the global financial crisis has created a much deeper market for real estate debt,” he says.

The fund has both retail and institutional share classes.

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