INVESCO Asia has launched its Global Landmark Income Fund, an open-ended fund designed to provide stable income streams and long term capital appreciation. The fund will achieve this by investing in a diversified portfolio of securities in the income generating global real estate sector including a variety of real estate investment trusts (Reits) from the US, Europe and Australia.
According to INVESCO, the target total returns will be comprised of a combination of dividend distributions and capital growth potential, with the former finding its way into investors' pockets in January, April, July and October, beginning 2006.
The basket will consist of a portfolio of roughly 125 companies, which will be selected from 580 global real estate securities, Reits and property trusts valued at $750 billion. INVESCO stressed that the majority of the exposure will come from the US and Canada, as the former accounts for around 45% of the total real estate securities universe. According to figures provided by the investment manager, real estate securities in the US are currently yielding between 4% to 6% and it expects the fundamentals to remain strong. It stresses that the national occupancy rate is expected to rise over the next three years and that fundamentals are also sturdy in the office sub-sector and retail sector. It also downplayed suggestions that property bubble talks are restricted to certain areas and largely specific to the residential space, which the Landmark Income Fund will not invest in.
On the European continent and UK, INVESCO also points to a yield rate of 3 to 5%, improvement in occupancy rates of London and Paris office and Pan European retail and growth in hotels as solid fundamentals in the fund. The inclusion of an Australian component in the basket is also justified by a high yield rate of real estate securities between 6% and 8%, and by further inflows into the Australian listed property trust from superannuation.
However, do not expect a large Asian component to exist in the fund, given the lack of any Reits in Hong Kong. The fund will probably invest via stocks of developers or operators in the Hong Kong property sector. The fund will also include Japan and Singapore real estate investments.
"We like the Central office market, which is demonstrating pretty good rental prices," says James Trowbridge of INVESCO real estate securities portfolio management team. "We expect to see a pretty large rise in rental incomes in Central and the retail market will be good also."
Constituents of the fund will be selected through a process of top-down analysis and bottom-up analysis, which includes market research, evaluations of property market rental growth prospects and individual company management and scrutiny of stocks according to relative yield, dividend coverage and relative value.
"Investors should stay global in real estate securities investment to enjoy the dual benefits of a stable stream of income from more mature real estate securities markets such as the US and Australia, and capital upside potential from emerging real estate securities markets such as Japan and Singapore," says Trowbridge.
The initial period begins on 16 June and commences on 22 July with an initial offer price of $10 per share. Management fees are 1.5% per annum and initial charges run up to 5.25% per share.