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Standard offers new UK fund Back  
The latest UK property fund offered to Irish investors from Standard Life carries no upfront charge and uses currency hedging to minimise euro-sterling exchange risk.
The fund is available under Standard Life’s Prosperity Bond. A charge does apply on the surrender of the bond within the first five years. The management fee is 1.95 per cent per annumand the minimum investment is ?7,500.

Richard Lavelle, assistant general manager sales & marketing Ireland was involved in the pricing decisions. Francis Salway, the firm’s investment director for property, will choose which properties to purchase. Technically he has authorisation to buy and sell properties up to ?10 million. Salway has been with Standard Life since 1986 where he has managed the company’s two UK unit linked property funds. Des Doran is director of investment for Ireland and has overall responsibility for the investment of Irish assets.

The size of the fund initially is ?30 million. Composition of the property portfolio is made up of retail (44 per cent) industrial (21 per cent) office (30 percent ) and 5 per cent classified as other. The properties in the fund are varied and include warehouse units near Gatwick Airport, a retail park in Chelmsford, South East England and office space at Charlotte Square/George Street Edinburgh.

In today’s climate of stock market volatility, Standard Life says that property has the potential to deliver returns over the long term and offers greater stability than equities. The average return on UK commercial property since 1971 has been 12.4 per cent per annum, according to IPD datastream. The tradition of long leases in the UK property market has generated secure income flows for investors, making the return from UK property even more stable than from other property markets.

Investors in the fund should be aware that the protection of currency hedging carries a cost, which reflects the difference in interest rates between the two currencies. The benefit of this reduced currency risk will carry a cost of slightly lower returns. Although, Standard Life’s currency ‘guru’ Murray Gunn belives that the long trend in sterling is downward against the Euro, to capitalise on future upward trends, he will vary the level of hedging between 75 and 95 per cent.

Prospects for the future are also very positive with the UK economy continuing to enjoy strong economic growth coupled with low inflation. In addition he said, the UK represents good value relative to other markets - a measure of this, according to IPD datastream is that UK property yields were running at 7.5per cent in the fourth quarter of 1999 as opposed to just 5.6per cent for Irish property.

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