Hedge fund manager ORN Capital has launched the first property derivatives hedge fund capitalising on the growth in the property derivatives market
The fund, named the ORN Property Derivatives Fund, will focus on the UK at first where the property derivatives market is more developed. It will pursue a a ‘relative value strategy with the flexibility to go long and short and with the intention of generating returns independent of the underlying property market’.
The fund has been seeded internally with ORN proprietary capital and has been trading since January. It will target traditional hedge fund investors including fund of funds, private banks, family offices and institutions. ORN also believes it may be attractive to traditional real estate investors who up until now have been able to invest on a long only basis.
Chris Iley, portfolio manager at ORN Capital, said: ‘There has been huge investor interest globally in the property sector. The growth of property derivatives together with expansion in the listed market, including REITs, has resulted in sufficient liquidity to launch a dedicated relative value fund. We wanted to be the first to offer clients a product looking to exploit an enormous market opportunity. The UK property derivatives market quadrupled last year and we believe that this rate of growth will continue.’
‘We will follow the market as it expands internationally– we have already seen trades in France, Germany and the US and expect to see a lot more cross-border activity over the next year.’
Iley, who has 15 years experience in the derivative markets will run the fund alongside Joakim Franson, a property index specialist from Investment Property Databank. Both joined Orn in 2006.
Trading in UK property derivatives has accelerated and £3.7bn of deals were carried out between the fourth quarter of 2004 to the end of September 2006.