Kames Capital has launched a new fund that enables pension schemes to track the commercial property funds market.

The Kames Active Beta Property Fund invests in a diversified portfolio of UK property funds.

Kames says it aims to match the return of the AREF/IPD UK All Balanced Property Funds Index with a low tracking error.

The fund will invest in a portfolio of commercial property funds that are constituents of the Index, with the fund managers taking small, risk-controlled active underweight or overweight positions against Index weights.

Phil Clark, head of Kames Capital's property investment business, said the Indirect property team has a track record of delivering investment performance for its clients and the new fund provides clients with an innovative way to access property returns.

The fund is managed by Tony Yu and Kames' head of indirect property Mark Bunney.

Yu said most small and medium sized pension schemes tend to access the property market through one or two balanced property funds, but investor returns from some individual balanced property funds have been damaged by redemption issues in recent years.

This has made it difficult for schemes to be confident in the long-term liquidity and performance prospects of a single fund approach.

"At the same time, over the past 10 years, we believe that many multi-manager and fund-of-funds approaches have incorporated too much leverage resulting in less liquid and more volatile returns than is desirable for UK schemes seeking a core exposure to the UK commercial property market," he said.

The solution, Yu said, is to invest in an actively managed diversified portfolio of open-ended balanced property funds – which will deliver returns with a risk profile appropriate for pension schemes seeking property market returns with an exceedingly low tracking error.

First published 07.07.2017

Lindsay.sharman@wilmingtonplc.com