HSBC Holdings, the world's fourth-biggest bank, is planning to launch a global suite of property funds of funds, probably starting this year, Guy Morrell, head of HSBC's real estate multimanager team, said.
"Over time there will be a whole range of funds of funds holding both direct and listed property securities," Morrell told Reuters in an interview.
The fund management arm of Europe's biggest bank, HSBC Investments, said it wanted to build up a real estate business, having historically had a limited presence in the sector compared with other bulge-bracket financial houses, he said.
He declined to specify how much the company was looking to raise for its looming series of funds.
But having integrated a seven-man UK-based property research team into HSBC Investment's $30 billion multi-manager business, the plan was to hire additional staff in New York and Hong Kong, he said.
"The move to HSBC Investments will ensure we will be plugged into the distribution channels of the group," he said. The HSBC group of investment businesses had $346.53 billion in assets under management at the end of June.
But barely 1 percent of that was in property, HSBC said. Morrell said HSBC Investments had taken the view that accessing property indirectly - through funds rather than by buying buildings directly - would be an efficient way for its clients to obtain access to this asset class on a global basis.
Like other property fund houses, HSBC was looking to tap a long-term trend in the way property investments were held, and in particular a shift into indirect property vehicles as institutions expanded beyond the familiar territory of their home markets.
"That's a trend we see growing in significance as both large and small investors obtain some if not all of their exposure through property funds," Morrell said. He said the plan was also to offer specialist property separate account mandates on a selective basis.
Morrell declined to detail the property sectors, national markets, or funds HSBC liked.
But he revealed a preference for Asian property markets over UK and US markets, where returns were set to slow after an extended period of strength. "Higher returns are on offer in the Asia-Pacific region but the risks are also higher," he said. "There is not the same breadth of funds that we have in the UK or in Europe but the fundamental case is much more conducive to strong returns."
He also said some real estate investment trusts (REITs) offered good value after falling sharply in 2007.
Morrell said he was keeping track of the expanding but young property derivatives market which could have a role to play in some of HSBC's future property funds, whether for tactical reasons, hedging risk, or putting money to work. HSBC established a property derivatives trading desk earlier this year.
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