Massive return in first year for CBRE property hedge fund

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by Lin Freestone

The joint venture fund set up by property fund manager CB Richard Ellis and US hedge fund manager Reech AiM, has delivered an annual return of 29%.

The Iceberg Alternative Real Estate Fund recorded a 29.12% return, net of fees, in its first year to May 2008 in spite of the sharp fall in property values across the market since the middle of 2007.

The fund uses complex derivatives to take positions on property markets in Europe. It also trades long and short equity stakes in listed companies, invests in unlisted funds, and will take opportunities that occur in the current market.

Recently, the fund has begun buying and selling discounted commercial mortgage-backed debt. The intention is to allocate approximately 15% of the fund to this sector in the future.

There are plans for further funds to be launched in the sector in the coming year.

One of the first specialist hedge funds in the commercial property sector, the joint venture partners consider that the market environment today contains many features which will play well to Iceberg strategies, uncertainty around future returns and valuations, price volatility, and an increasing focus on fundamentals.

These coupled with the still growing investor interest in real estate as an asset class means Iceberg has an increasing opportunity set from which to pick appropriate strategies.