Pentacle Property Funds Management has launched two high-liquidity unlisted direct property funds of funds, with one offering investors access to their money within just three days.
The Pentacle Diversified Fund (PDF) Enhanced, which will initially be capped at $50 million, promises redemption within just three days of receipt of a redemption notice. The PDF Standard is an open-ended fund which offers redemption within six months, but aims to give access to money within 30 days of receipt of a redemption notice for amounts less than $1 million, and 60 days for larger amounts. James Burkitt, chief executive of Pentacle, said these redemption periods compared to a typical wait of at least 12 months for unlisted property funds. He said Pentacle was able to offer such quick turnaround because the funds would basically be underwritten by some of the core fund managers involved as well as other groups, via things like put options. The underwriters are obligated to buy back units in unlisted funds if redemption requests can’t be meet from listed property trust exposure or cash. The incentive to underwrite redemptions comes through fees, which will go directly to the underwriters. Investors in the ‘enhanced’ fund will pay an extra fee of 0.35 percent, and a 1.5 percent exit fee. Underwriters get the exit fee as a 1.5 percent discount on the market price of the stocks they are asked to buy back. Burkitt said some super funds might also want to underwrite, if for example they were underweight unlisted property and wanted to collect the fees. “People who don’t need liquidity can pick up a fee from the people who do need it,” he said. Burkitt said the funds would be more attractive to dealer groups than other unlisted diversified property funds as their high liquidity made them “platform friendly”. The PDFs composition will be similar, but not identical, as the Enhanced fund can only offer funds that have been underwritten, The funds will be diversified across the retail, office and industrial sectors. They can invest up to 40 percent offshore – with a benchmark allocation of 20 percent, and up to 30 percent in listed property trusts – with a benchmark allocation of 5 percent. The core managers are Centro Properties, Lend Lease, Investa Properties, Stockland Corporation, Macquarie Goodman and Colonial First State Investments. The minimum investment is $50,000. The funds are available now to institutions, corporates and super funds through financial planners on platforms and wrap accounts. A Product Disclosure Statement will be released in June, opening the funds up to retail investors. The privately owned property company Salta, which is a 50 percent shareholder in Pentacle, has seeded the first investment, putting $5 million into a US shopping centre investment, Centra 36. Pentacle aims to raise up to $250 million within a year, with each fund providing a return of 9.5 percent a year.
Since taking over the top job at the $44 billion Funds SA more than a year ago, chief executive John Piteo has ushered in an investment function overhaul and wrapped up an important stage of the fund’s five-year data transformation program. It pledges to recentre around investment performance and more efficient processes, as the “missing piece” has been found in incoming CIO Con Michalakis.
Darcy SongJanuary 10, 2025
