AEW and M&G cast net wider with fund revamps

Two UK-focused open-ended funds have changed their structures in bids to attract a wider field of investors.

AEW’s high-income UK Core Property Fund has become a Property Authorised Investment Fund (PAIF), while M&G Real Estate has switched the 42-year-old M&G Pooled Pension Fund to a Luxembourg structure  and renamed  it the M&G UK Property Fund.

Dermot Kiernan, manager of the £580m M&G fund, said the pension fund investors had agreed to open it up, partly to “future-proof it – most are defined benefit funds and over time they will reduce in size. We want to grow it and get even greater diversification.”

He said there was demand from overseas investors that are encouraged by the improving outlook for UK economic growth and in some cases the depreciation of the pound against their own currencies, particularly in the US and Asia. Richard Tanner, managing director of AEW UK, also reported Asian investor interest.

His fund, which was launched early last year and buys small, high-yielding assets, had invested the £50m cornerstone investment from a Townsend client and was about to take in “£20m-£30m from Asia”.

Kiernan is selectively targeting investments with more risk, but with the prospect of rental growth as well as strong income to supplement the core portfolio.

The fund has just bought the 100,000 sq ft Renaissance office development  in Croydon from Abstract Securities, which is 40% prelet, to The Board of the Pension Protection Fund, at £22-£23/sq ft.