The UK’s patchy property market will be given a much-needed boost from retail investors with legislation introducing real estate investment ...

The UK’s patchy property market will be given a much-needed boost from retail investors with legislation introducing real estate investment trusts to the sector. The UK Chancellor, Gordon Brown, announced the legislation in his pre-Budget report and the framework for Reits will be in place this spring with this year’s finance bill.

Hundreds of thousands of small investors are expected to want to invest in the property sector through tax-efficient Reits.

Unlike existing property companies, Reits pay no corporation tax. Instead, tax is paid only at the shareholder level on dividends received.

The UK housing sector is suffering from chronic under-supply at all levels and commentators suggest that it is this rather than demand that is fuelling recent price rises.

Net asset outflows of around £7.8 billion for 2005 are expected at UK-based F&C Asset Management. Net year-end assets under management are expected to be €11.5 billion in 2005.

The announcement follows the unexpected exit of former chief investment officer Tony Broccardo in November. His role has been taken over by Fernando Ribeiro.

“While investment performance has stabilised or improved in a number of areas during 2005, there are some product areas where we are devoting further attention,” said incoming chief executive Alain Grisay.

“The poor three-year records in these areas have continued to lead to client outflows during the final quarter of the year,” he added.

Most of the outflows are on the institutional side of F&C Asset Management.

Brewin Dolphin Securities said that its funds under management in its unit trusts and open-ended investment companies have more than doubled in the past three years to £1.7 billion.

London-based Brewin said in a statement that the firm attributes the rise to a growing appetite among some investors to reduce the risks sometimes associated with direct equities for smaller portfolios.

“Brewin Dolphin believes that investors have been attracted to its independence, as it does not have any in-house funds, and the benefits of having an individual portfolio tailored to suit their specific needs,” said the firm.

London is becoming increasingly important as a centre for alternative assets such as hedge funds, private equity and equity derivatives for the wealthy, according to a report from International Financial Services London, a trade promotion body.

Alternative investments can readily be accessed in London, the report said, which has established itself over the past two or three years as the dominant European centre for hedge funds.

Hedge funds in London have risen by 80 per cent from $122 billion at end-2003 to $213 billion in mid-2005; this represents 70 per cent of the European total.

Moreover, half of the $24 billion investments in the European private equity market are made in the UK, said the IFSL report. And trading in equity derivatives at Euronext.liffe and Eurex, which largely originates in London, is expected to reach nearly €20 trillion in 2005, three times that of 2000.

IFSL went on to say in the report that those investors with more than $1 million of investable assets are a major driver for the alternative investment market in London.

Europe
Fidelity Investments is setting up a multi-manager business that will eventually offer manager of managers services. To fulfil this, the company is looking for a business development director for their multi-manager business.

The role will be UK-based but with a European remit and because it is a new business, the director will be tasked with “quick wins” as well as building long-term relationships.

Initially focusing on fund of funds the new unit will eventually become a manager of managers.

UCITS III legislation must be updated to remove barriers to cross-border distribution of funds within Europe, according to a new report by ratings agency Standard & Poor’s.

In the S&P report: “From UCITS III Toward A Single European Mutual Fund Market,” the agency raises a number of concerns regarding the legislative framework for UCITS III.

In particular, the notification procedure for registering UCITS funds in other member states needs to be streamlined, according to S&P. The current process is cumbersome and can be costly especially as translation of all fund details into the local language is often a requirement.

Furthermore, the documentation required by local regulators to authorise UCITS for local distribution is not homogenous, as Eurpean Union member states are reluctant to give up local practices. The time required for approval of a UCITS varies greatly between 15 days and three months, or even six months in some instances.

Barriers to trade entry in some EU country may lie outside the approval process. For instance, Germany insists on additional language quarterly financial reporting obligations for funds. This makes market penetration uneconomical for smaller funds.

On the positive side, S&P report that from the investor’s perspective the UCITS status enhances a fund’s credibility.

Some respondents to the survey reported that the process for registration of UCITS in other EU member states has improved and that the UCITS directives have brought opportunities in terms of market reach and provides a safer investor environment.

WestLB and Dekabank are planning to launch a fund management joint venture in Luxemburg in 2006.

Dekabank is to hold 51 per cent of the joint venture, while WestLB Asset Management will have the remaining 49 per cent.

WestLB has also recently entered into a joint venture with Mellon Financial to set up an asset management firm.

The Düsseldorf-based bank also bought the private bank Weberbank this year.

Switzerland
Pictet has launched three new indices under the LPP brand including an alternative investment index.

The three are a broader diversification of equities, which includes small caps; a broader diversification with bonds, which includes a greater proportion of world bonds prices; and alternative investments, with the inclusion of real estate, hedge funds and private equity.

The names of the new indices are geared to those in the LPP-Indices 2000, with the suffix "plus" added in each case.

Pictet introduced the LPP index family in 2000 and they have since become a major benchmark of indices in Switzerland.

US
US mutual fund giant Fidelity Investments has launched an experiment aimed at redefining how commissions on Wall Street are paid.

It has negotiated a cash deal to pay Lehman Brothers for stock research, rather than paying for research with inflated stock-trading commissions, so-called soft commissions. The move is aimed at increasing investor returns.

Other brokerages, fearing the loss of Fidelity's huge trading business are reconsidering their positions on soft commissions. Smaller brokers are also worried that they could get squeezed out as Fidelity negotiates deals with bigger firms.

Other fund managers say that they have already reduced trading commissions to nearly the level that they believe Fidelity has negotiated with Lehman. Concerns have also been expressed about the impact that Fidelity-like deals may have on the availability of research and the quality of trading.

Offshore
Jersey’s funds and banking sector continue to reach new record levels in the third quarter. Neither appears to have been adversely affected by the European Union’s Savings Tax Directive that was introduced on 1 July 2005, according to Jersey Finance.

Bank deposits increased by £6.6 billion to £179.6 billion, a rise of 3.83 per cent, whilst the net asset value of funds under administration in Jersey grew by £9.3 billion during the quarter to reach a record high of £121.9 billion. This represented a rise of 8.3 per cent.

The number of expert funds established in Jersey increased from 79 to 98 and the total value of funds under investment management increased by 16.26 per cent to £42.9 billion during the quarter.

"The growth in these specialist areas reflects the clear commitment of the Island’s government and regulatory authorities to support the Industry’s drive to establish Jersey as the European domicile of choice for alternative investment," said Phil Austin, chief executive of Jersey Finance.

The investment arm of Close Private Bank, Close Investment Services, has merged its Jersey-based Foundation Fund range with its Cayman Islands-based Global Fund range.

The merger will result in a single Jersey-domiciled range called Close Global Funds and revised risk profiles.

“The merger will provide clients with greater diversification and choice of investment funds. It will result in the reduction in costs, fees and expenses of maintaining and managing the funds as well as offer free switching,” said Simon Dowling, Close’s fund management director.

The Close Global Funds range employs an absolute return strategy that uses a multi-asset and multi-manager investment approach. It invests in a range of different asset classes including multi-currency money market funds, sterling income funds and euro income funds.

There are 17 sub-funds that will be enhanced by two new strategy sub-funds that will be available in three different currencies early next year.

Although it is listed on the Channel Islands stock exchange it falls outside the scope of the European Union’s Savings Tax Directive.

Asia
WestLB Asset Management has entered into a joint venture with Japan Asia Investments to target both private and institutional investors. The new joint venture will be called JAIC WestLB Asset Management and will be 50 per cent owned by each firm.

It will be headed by Izumi Konishi as president and chief executive. As part of the agreement, WestLB will inject capital into JAIC’s 100 per cent owned subsidiary, JAIC Investment Advisory.

JIA, which has a discretionary investment license, has been engaged in managing the assets of investment corporations, with a particular focus on private equity investment. Following the capital increase, the new firm will expand its area of business and plans to launch a Japanese global private equity fund-of-funds.

WestLB recently entered into a joint venture with Mellon Financial for a jointly managed asset management firm targeting European investors, mostly on the institutional side.