Legal & General Investment Management has proposed changes to its UK property fund by shifting from a direct property focus to include indirect property holdings through real estate investment trusts (Reits).
This move would be referred to as PAIF Hybrid and would see it reduce its exposure to direct property investment to 45 per cent.
The fund will also allocate 45 per cent to global Reits and place 10 per cent in cash.
This comes as part of a commitment to continue providing investors with access to direct UK property investments and consider requirements for a daily dealing product for the sector.
LGIM head of UK wholesale, James Crossley, said: “We believe that these suggested changes to the fund are in the best interest of investors and recommend that they vote in favour.
“As a property sector leader for over 16 years, we are well positioned to continue providing balanced property exposure to investors.”
Crossley added that, relative to other asset classes, L&G feel that the UK property sector remains an “attractive diversifier” in any balanced portfolio, and is “well positioned” for investors with long-term horizons.
With assets under management of over £1.2bn, the L&G PAIF is the largest in the sector and one of the best performers over three and and five years respectively.
The changes will provide investors with the continuity of access to the experience and expertise of the L&G PAIF management team, led by fund managers Michael Barrie and Matt Jarvis.
The new structure will seek to maintain investor demand for access to a daily dealing property fund.
The proposal requires approval by an Extraordinary Resolution passed at the shareholders’ meeting planned for April 10.
Speaking on the announcement, Quilter Cheviot property research analyst, Oli Creasey, described it as “significant”.
He explained that it is significant for a number of reasons, “most notably, this appears to be a direct response to the ongoing Financial Conduct Authority consultation regarding daily-dealt property funds.”
He added: “The reduction in direct exposure will place the fund outside of the consultation, which is focused on funds with less than 50 per cent direct exposure”.
According to Creasey, this means that if the FCA’s conclusion is to require daily-dealt property funds to put in place three to six month redemption delays, the L&G fund will still be able to offer daily liquidity to shareholders.
tom.dunstan@ft.com
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