Fidelity sells property fund to retail

The new long-only fund plans to invest in pan-Asia real estate equities.
Fidelity International has launched a new open-ended fund in Hong Kong. The Asia Pacific Property Fund will maintain a portfolio of approximately 40 holdings. It will benchmark returns against, and seek to beat, Global Property ResearchÆs general quoted Asia net index.

FidelityÆs Polly Kwan, who has three years experience investing in property equities, will manage the fund. ôIÆm running the fund on a long-only basis,ö she says. ôI shanÆt be taking any short positions on property shares.ö So it is therefore a fund for investors who have an unalloyed bullish view of Asian property, which, given the two-way volatility swings of property equities in Asia, naturally limits the returns available from active management.

But this is not a hedge fund. It has a minimum investment of $2,500 and will be distributed via FidelityÆs network of 100 distributors in Hong Kong, including retail banks and insurance companies. Charges are up to 5.25% upfront with a 1.5% annual management fee. The fund is to a large extent staffed, but it is still looking to hire property analysts in Singapore and Mumbai.

Fidelity market-researched the establishment of this fund and commissioned a survey from AC Nielsen, which approached 515 investors each with minimum monthly net income of HK$15,000. What they discovered from this group of distinctly non-high-net worth individuals was that about a third were optimistic on Hong Kong real estate, but didnÆt have the money to acquire physical property. One rationale predicating this fund therefore was to plug the investment gap for investors who are bullish on real estate but canÆt afford physical property.

This seems to neglect the obvious riposte that this fund invests not in physical property but in property shares, which presumably those low-net-worth investors polled could still go out and buy in small lots if they just put a call into their broker.

Fidelity Hong Kong was formed in 1981. It is one of the largest providers of Orso [Occupational Retirement Schemes Ordinance] pension schemes in Hong Kong. It is a subsidiary of Fidelity International Limited, which manages global assets of $276 billion outside of North America.
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