Grinrod Bank launches global property income fund

Grindrod Bank, the financial services arm of leading logistics company, Grindrod Limited, has announced the launch of a new global property income fund that promises to be a much-needed destination for investors seeking a high yield in these troubled times. The fund, which is based on an innovative and comprehensible model, is delivering yields in the region of 16,5% at present, and the bank anticipates that it will be able to outperform the yields of most global property indexes by 200 to 800%basis points on an on-going basis.

“The motivation for the establishment of the fund was concern about how investors, including those living on fixed incomes, were being impacted by the current global financial crisis,” says David Polkinghorne, CEO. “With interest rates dropping at home and abroad, local listed property delivering lacklustre yields, we felt there was an urgent need to apply our minds to the needs of investors who require regular income as well as long-term capital appreciation from their investments.”

What makes the new fund different from other property funds is that it is a locally-domiciled, rand-denominated global property fund. Thus the investor is not subject to the R2million limit on offshore investments. The fund manages all currency exchanges, and pays yields in rands. “In simple terms, what this means is firstly that the fund in based here in South Africa,” says Polkinghorne, “and is subject to local rules and regulations, which are recognised worldwide for their integrity and stability. The result is exposure to quality global property assets in desirable locations such as New York, Paris, London and Singapore.”

In the wake of the subprime meltdown, this offers investors a much-needed sense of security as they will be able to trace their holdings to specific properties. “Essentially, the fund invests in a global portfolio of publically-traded real estate investment trusts or REIT’s, and REIT investment vehicles,” says Polkinghorne. “This offers investors ownership of investment-grade commercial real estate, effectively enabling them to pool their funds and to give a professional fund manager the authority to manage these properties on their behalf.”

REIT’s, which are traded on all major stock exchanges, offer the benefits of property investment without the hassles of direct property ownership. They also offer investors the opportunity of investing in large commercial developments that they would otherwise not be able to afford to invest in. As importantly, REIT’s usually have tax-free status, which means that yields are taxed in the hands of the investor, and are not subject to a chain of taxes prior to disbursement.

“Our aim with the Grindrod Global Property Income Fund is to provide current income off a tangible base, while simultaneously ensuring long-term capital appreciation,” concludes Polkinghorne.

“This is a new fund that we believe is the right product and the right time – a new choice that investors haven’t had before.”