AXA Real Estate Investment Managers has launched the UK Long Lease Property Fund, which aims to offer UK institutional investors, pension schemes and investment consultants a new property-based, liability matching solution with long and secure income streams.
The open-ended fund will offer investors, and pension funds in particular, the opportunity to invest in a broadly diversified portfolio of UK long lease assets, with a focus on strong property fundamentals that enhance the defensive profile of the fund.
AXA Real Estate will also draw on its dedicated alternatives and hotels business lines to provide investors with expertise and exposure to a wider variety of sectors.
The fund will target a range of sectors from traditional long lease assets like supermarkets, distribution centres and offices, to more alternative assets such as healthcare, social housing, student accommodation, hotels, leisure, automotive and ground leases.
The fund will aim to maintain a long weighted, unexpired average lease term of 20 years or more mostly with inflation indexation or fixed rental uplifts underpinned by high quality tenant covenants. This strategy is expected to generate long term and stable income streams often with inflation indexation for institutional investors that are looking for investments with liability matching attributes and is particularly well suited for pension schemes.
AXA Real Estate has raised an initial GBP125m and aims to grow the fund to a size of around GBP1bn over the next five years.
Deborah Shire, global head of business development at AXA Real Estate, says: “With bond yields remaining at record lows, liability matching has become the key challenge for many institutions and pension schemes in particular. We believe that the stable long term and mostly inflation indexed income generated by long lease property offers an attractive alternative for investors, while, at the same time providing diversification benefits to the rest of their fixed income and property portfolio.”
John Osborn, fund manager – UK Long Lease Property Fund at AXA Real Estate, says: “AXA Real Estate’s strong expertise in the UK market with an extensive transaction network puts us in an excellent position to source attractive long lease deals both on and off market. The fund will invest in a wide range of sectors and leverage off our expert teams in alternative and hotel assets.”