Pentacle offers liquid unlisted direct property

Pentacle Property Funds Management has released two unlisted direct property fund of funds with unique features to address the liquidity concerns associated with the asset class.

“PIR [Property Investment Research] last year came out with some research conducted over a two-year period that examined three-and-a-half thousand financial planners, and the question they put to them was why haven’t they invested in unlisted properties. The number one reason was illiquidity … So we started about 14 months ago to think about how you can deal with liquidity,” Pentacle chief executive James Burkitt said.

Pentacle’s solution to the liquidity issue was to establish two unlisted property funds with different liquidity characteristics.

The Pentacle DPF Standard is an open-ended product where the redemption of investors’ funds is available within six months of a redemption notice.

The Pentacle DPF Enhanced, on the other hand, is a capped offering, initially at $50 million, where funds can be redeemed within three days of a redemption notice.

“With the enhanced fund we’ve actually got arrangements with a variety of fund managers and other institutional investors to buy the stock. It means that if we go to XYZ group and say ‘we need the cash’, they deliver the cash to us and they buy the units,” Burkitt explained.

Each product is a daily priced fund-of-funds offering with specialist underlying managers including Lend Lease, Centro, Stockland and Macquarie Goodman.

“We recognised the part of the market that really wasn’t being used, apart from by the top 30 investors in the country, was sector specialists,” Burkitt said.

The parameters applied to each product dictate 70 to 100 per cent of the funds available be invested in unlisted property. Within this pool 45 per cent of the funds will be allocated to the retail sector, 15 per cent to industrial, 35 per cent to office, and 5 per cent to special opportunities.

To deal with the capacity constraints of the underlying managers and the associated timing problems, each offering can also invest up to 30 per cent of its accumulated funds in listed property trusts.

The two funds are immediately available to wholesale investors and will be launched into the retail market in the next three weeks with a minimum investment level of $50,000.

Retail investors can access the funds via financial planners, platforms and wrap accounts.

“We’re targeting a small number of the platforms, just a small group … The other part of the market will be a lot of the financial planners who don’t use platforms, probably dealing with DIY clients,” Burkitt said.