Threadneedle Investment Property is to launch a second UK opportunity fund to take advantage of the downturn in UK prices.

The fund will be launched in July, hot on the heels of the final closing the first Threadneedle Uk opportunity fund in May (Property Week, 23/11/07).

Investor appetite

Threadneedle will look to raise around £120m in equity for the fund. Normally opportunity funds would have gearing of around 75%, but Threadneedle Property managing director Don Jordison said that the credit crunch meant it would be more likely to have gearing of between 50% and 70%, which would give it between £250m and £350m.

In a bold statement of confidence in the UK market, Jordison said that he did not think there would be a wider economic downturn that would lead to a crisis in the occupational market, and that there would not be a further sharp correction in the market.

He said: ‘There will be some oversupply in the City, but I think that that will be isolated. In sectors like retail companies are surviving and there is not a great deal of space being released on to the market.

No oversupply

'You don’t have the same situation as you did in the late 1980’s, when there were lots of merchant developers around with loads of empty buildings.’

Jordison said that he was confident that property would provide a flat total return in 2008 and return to the historical norm of 5-7% in 2009.

The new Threadneedle fund is aiming for total returns of 12-15% over its five to seven-year lifespan.