Barclays has launched two Property Index Certificates (PICs). The move is a way to offer wealth managers an efficient and a lower-cost way to gain access to the UK commercial property market.
The new PICs will mature in 2015 and 2016. Each one will track the Investment Property Databank (IPD) UK commercial property index and will provide total return exposure. These investment products will embed property derivatives into a Barclays note meaning that investors will share the credit risk of Barclays bank.
The certificates track the index, which means investors are exposed to the downside. There is no capital protection with this type of investment. The products have a 0.15 per cent index fee, which is deducted from the quarterly income payments.
According to Lisa Chaudhuri, vice president of investor solutions at Barclays, wealth managers and asset management firms have indicated interest in these types of products. The Bank expects to raise approximately £100 million for the product by the end of 2013.
Chaudhuri said recently, “Investors are now coming back and showing interest in commercial property, partly because of the rally in equities, which have been a beneficiary of quantitative easing.”
The average yield on the IPD index is 6.5 per cent. This figure is higher than the average yield of 3.5 per cent on an FTSE 100 company, according to Chaudhuri.
She also points out that the products could offer wealth managers a very efficient and lower-cost way of accessing commercial property without having to go through the steps involved in purchasing physical assets.
It would be an ideal situation for a client who appreciates the benefits of investing in the market at a time when indicators suggest that returns are on the rise.
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