Legal & General Investment Management (LGIM) has announced plans to revamp its UK property fund, introducing a strategy that blends direct property investments with indirect holdings. The new approach, dubbed the PAIF Hybrid, aims to adjust the fund’s composition by reducing its direct property investment to 45%, while allocating another 45% to global real estate investment trusts (Reits), and maintaining 10% in cash.

This strategic shift reflects LGIM’s commitment to offering investors continued access to the UK’s direct property market, while also addressing the demand for a daily dealing product in the sector. James Crossley, LGIM’s head of UK wholesale, expressed confidence in the adjustment, stating, “These suggested changes are designed with investors’ best interests in mind, ensuring they benefit from balanced property exposure.”

The transformation is seen as a move to keep the UK property sector an appealing option for investors seeking diversification in their portfolios, especially those with a long-term investment outlook. With over £1.2 billion in assets under management, the L&G PAIF stands as the sector’s largest fund and boasts strong performance records over three and five-year periods.

Under the leadership of fund managers Michael Barrie and Matt Jarvis, the new fund structure aims to sustain investor interest in accessing a daily dealing property fund, leveraging the management team’s proven expertise and experience.

The proposal is set for a vote at an upcoming shareholder meeting on April 10, requiring approval through an Extraordinary Resolution.

The announcement has caught the attention of industry analysts, including Quilter Cheviot’s property research analyst, Oli Creasey, who highlighted the significance of LGIM’s move. Creasey pointed out that this strategy seems to be a proactive response to ongoing discussions by the Financial Conduct Authority regarding the liquidity of daily-dealt property funds. By adjusting the fund’s direct exposure to below 50%, LGIM’s PAIF would not be subject to potential regulatory changes mandating redemption delays for such funds, thus preserving its ability to offer daily liquidity to its shareholders.