Investors chase yield in unlisted wholesale funds

DIRECT property and unlisted funds are experiencing an inflow of cash as investors look for higher-yielding returns in these closed-end wholesale vehicles.

DIRECT property and unlisted funds are experiencing an inflow of cash as investors look for higher-yielding returns in these closed-end wholesale vehicles.

The increased allocation is evidenced by the push from the listed sector to create a series of unlisted funds to boost their management fees and offerings to investors.

Mirvac, under the direction of its new chief executive, Susan Lloyd-Hurwitz, has indicated it plans to create a series of unlisted "club funds". Other companies, including Charter Hall Group, GPT Group and Goodman, are also managers of wholesale funds.

Charter Hall's retail division head, Richard Stacker, on Tuesday launched the group's second industrial fund, the $200 million Direct Industrial Fund No.2, aimed at returning a target yield of about 8 per cent.

"Direct property has a compelling investment case and the asset class [industrial] is well placed given the historically large positive spread between property yields and debt costs, long lease and sensible debt and liquidity structures," he said.

The research manager for Charter Hall, Chris Freeman, said a lack of supply for industrial assets and the growth in e-tailing was underpinning the sector.

On the listed side, Folkestone, run by former Mirvac boss Greg Paramor, said the group reported a net profit of $700,000.

Mr Paramor said the company's focus was also on the funds management sector.

"The first half of the 2013 financial year has been very active for the group, which has seen the completion of the transformation of Folkestone from a pure real estate developer to a real estate funds manager, investor and developer," he said.

This was boosted by the takeover of the Austock property funds management business, which gave Folkestone about $560 million in funds under management across four listed and unlisted funds.

"Over the past 18 months, we have sold legacy assets, recycled capital and established a funds management platform that now offers listed and unlisted real estate funds to private clients and a number of institutional investors," Mr Paramor said.

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