TD Asset Management launches new global real estate fund for institutional investors
BY Yaelle Gang | February 11, 2020
TD Asset Management Inc. is launching a new fund to meet the needs of institutional investors looking for exposure to global real estate markets.
The fund, which includes both direct and indirect global real estate investments, was seeded in 2019 and has exposure to more than 600 properties in approximately 15 countries. It includes office, retail, industrial and multi-unit residential real estate.
“We like to talk about the fact that our focus is not on countries, but it’s individual cities and it’s demographics and economics within those cities,” says Andrew Croll, vice-president and director of alternative investments at TD Asset Management. “And so, multi-unit residential will be a key component of this strategy alongside retail, office and industrial property types.”
From an investment standpoint, the fund operates a core-plus strategy. “There will be elements of value-add and opportunistic real estate within the structure that we’ve created, which we think is important because then it creates a holistic approach for a client to gain access to the full lifecycle of investing in real estate.”
Another important element of the strategy is its inclusion of investments in Asia-Pacific and Europe, which allows for better diversification, adds Croll.
The fund takes a non-hedged approach to currency management, but TD Asset Management has the capability to use derivatives and work with investors that may be sensitive to currency exposure and want to hedge back to Canadian dollars, he says.
“But we’ve done some work on the pros and cons of currency within a real estate strategy and what we find is that the costs of putting on that hedge can be quite significant. And really, you actually gain additional diversification through the movement of currencies over time. So you can have short-term fluctuations in currency, but over the long run, the volatility of an unhedged real estate strategy that has a diverse basket of currencies is actually more attractive than a fully-hedged solution once you take into account the cost of putting on a hedge.”
Of note, the fund is a Canadian-domiciled structure. “So even though we have entities that allow us to invest in different geographies around the world, the entity that our Canadian institutional clients will contract with is a Canadian-domiciled vehicle as opposed to something that would be out of perhaps Luxembourg or Ireland,” Croll says. “And we think that, as we go through things like onboarding clients, having a Canadian-domiciled vehicle will be quite client-friendly for the institutional clients that we serve.”
The fund is an open-ended strategy that requires a two-year commitment period and a minimum $2 million commitment.