If anything, the turbulence experienced by financial markets in recent years has significantly increased demand by investors for less volatile investments. Because of that, many have turned to property investments, which historically have proven to be a strong source of income and total returns, not to mention being notable for their limited volatility and lack of correlation to other asset classes. This was not lost on Global Asset Management, and was the reason for creating a consolidated global real estate business earlier this year. Although property investments had been actively pursued by Global Asset Management for a number of years, the new platform now provides a centralized infrastructure, and management with specialized property investment expertise. This gives clients a focused and global organization and the Business Group itself a base from which to considerably expand its global range of real estate capabilities.
The business purchases, sells and actively manages investments in property, including office, industrial, retail and residential real estate. It then structures them into private commingled funds, publicly listed investment funds or individually managed client accounts. With CHF 20 billion in invested assets and over 234 employees and 13 offices around the world, the business is organized into four regional units: the Americas, UK, Continental Europe and Asia Pacific.
The Americas is the largest unit, with some 147 employees in Hartford, New York, Dallas and San Francisco. It has CHF 12 billion in invested assets in various funds and client mandates that hold some 260 properties - from offices and malls to warehouses and hotels - as well as over 30,000 residential apartments. Also part of the Americas business is AgriVest, a farmland investment subsidiary. Farmland investments have similar return characteristics to property and provide solid risk-adjusted total returns with a significant income component. AgriVest has generated strong performance relative to the National Council of Real Estate Investment Fiduciaries (NCREIF) Farmland Index over its 12 year history.
The Continental European business has CHF 6 billion in invested assets, all of which are currently in Swiss-based investment vehicles. These constitute more than a third of Switzerland's listed real estate fund market. In the UK, the business manages CHF 1 billion in gross assets in the UBS Triton Property Fund and a fund of funds, with 43% of property investments in retail, 33% in offices and 24% industrial. In Asia Pacific, CHF 1.35 billion in retail real estate is managed through a Tokyo-based joint venture with Mitsubishi Corporation.
Many of the real estate investments around the world have exemplary track records. In the US, for example, the business has achieved an annualized return of 12.46% over 10 years compared to the benchmark return (the NCREIF Property Index) of 9.63%. In Switzerland, the majority of our listed real estate funds have outperformed their benchmark on a year to date basis. The UBS Triton Property Fund in the UK exceeds its long-term market benchmarks. In May 2002 it was awarded (for the third year in a row) the „Top Performing Portfolio” in its category for the three year period to December 2001 in the Estates Gazette/Investment Property Databank awards. In Japan, the joint venture has proven to be a highly successful, growing business. The Japan Retail Fund, a publicly traded J-REIT (Japan Real Estate Investment Trust), has risen more than 30% between the time of its launch in March 2002 and the end of September this year.
With the global platform now in place, management attention is focusing on the growth and development of the business. Increasing product development efforts will be targeted at developing open-end commingled funds that are tailored for distribution through UBS channels. These funds will pool together assets from many clients to reduce management and administration costs. As an example, Global Asset Management is working closely with Wealth Management & Business Banking to launch a new global real estate fund of funds in second quarter 2004. In Continental Europe, the real estate platform was significantly expanded in July with the hiring of a senior management team previously employed by Lend Lease Real Estate Investments Europe. Their experience will assist the planned launch of an open-ended Euro real estate fund for wholesale clients. Additionally, several closed-end funds and individual client account investment vehicles will be targeted at European institutional investors. With an expanding line of products and deep worldwide management expertise, Global Asset Management's real estate business is in a prime position to satisfy the increasing demand for an array of property investment products from institutional, high net worth and affluent investors.
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