Nomura in London has put together a basket of property funds referencing diverse property investments in the U.S., Europe and Asia, and added a guarantee to protect 80% of the fund's highest net asset value. The fund uses constant proportion portfolio insurance to allocate assets between the fund basket and cash depending on the performance of the basket. Nomura takes the risk of a sharp drop in the value of the funds. It is open-ended which is also unusual for a capital-protected structure.
Garry Topp, director at Nomura in London, explained Nomura is also able to adjust the weightings of the funds within the basket and will do this based on research from Morgan Stanley. It chose the U.S. firm because it has property teams in Asia, the U.S. and Europe and produces global research. The basket consists of six property funds managed by Henderson Global Investors, Credit Suisse and Morgan Stanley. Topp said capacity will not be a problem and the firm expects to be able to raise around USD100 million.
There has been substantial investment in property in the European markets Nomura is targeting, but Topp noted a lot of the investment has been focused on single funds or domestic bricks and mortar. "We thought now was the time to bring a proper diversification story," he added.