Hedge funds seen eyeing property investments

By Laurence Fletcher

LONDON (Reuters) - Hedge funds are beginning to invest in property as part of a move into new assets, Nils Tuchschmid, head of multi-manager portfolios at Credit Suisse (CSGN.VX: Quote, Profile, Research, Stock Buzz), said on Tuesday.

Speaking at the Reuters Hedge Funds and Private Equity Summit in London, Tuchschmid said some hedge funds, looking for assets uncorrelated to those already in their portfolios, favor property for the security it can offer.

"Hedge funds are looking for new alphas (returns irrespective of the effects of market movements) ... In the U.S. you're starting to see hedge funds finance the development of a property," he said.

"If anything goes wrong, they can get the property, no question. But there is an issue of whether they are becoming a real estate boutique ... There aren't so many real estate hedge fund managers in the industry, but it will come."

The $1 trillion to $1.5 trillion global hedge fund industry has seen opportunities for investment returns in some asset markets, for instance convertible bonds, eroded as new players and new money entered the sector.

NEW MARKETS

This has persuaded some hedge funds to invest more in assets such as property, which can offer higher security, or commodities, which can offer better returns.

Property, which has been a strong performer in recent years and which can offer a high yield, has also attracted inflows from pension funds and retail investors.  Continued...