One of the largest UK property funds is to use derivatives as one of many strategies to be more flexible in investing its cash pile. On 24 February, Scottish Widows Investment Partnership will ask the SWIP Property Trust’s owners to amend the trust deed to allow it to invest in a wider range of financial instruments. It is also seeking approval to take on gearing. The £1.8bn SWIP Property Trust is one of the two largest authorised property unit trusts and has £400m of cash. Fund manager Gerry Ferguson said it was the right time to expand the trust’s investment policy and borrowing powers.
“This will provide greater flexibility in gaining exposure to property. It will be prudent to hold a greater proportion of investment in assets that are more liquid,” Ferguson said. Ferguson’s team also wants to buy debt and other indirect investments in the UK and internationally. The trust already has a mandate to invest in direct property outside the UK. A change in strategy would boost the derivatives market, where volumes shrank in 2009 to £3bn, with £1bn transacted in Q4, although this was in line with the direct market trend. Land Securities has asked Royal Bank of Scotland and JP Morgan to advise on trading derivatives, but has yet to trade.