This publication recently interviewed a manager of European real estate for its positive - and negative - views of the market.

There are numerous ways to play the real estate investment market, and one route is to employ some of the techniques of hedge funds, with their ability to profit, or hedge – suitably enough – by shorting the securities of property-linked securities, for example. A firm that takes an absolute return approach to property is UK-based Clerkenwell Capital. This publication recently spoke to the firm about its Clerkenwell Matterhorn Fund, which requires an initial minimum investment of £10,000, with monthly liquidity. The portfolio manager is Sturgeon Ventures and it is administrated by Apex Fund Services (Malta). Adrian Elwood is the fund’s manager.

The Clerkenwell Matterhorn Fund is a long-biased absolute return fund that invests in listed property companies. The portfolio is structured as a core portfolio, typically 80 per cent or so, of strong conviction long and where appropriate short positions, in mainly mid- and small-cap stocks, with a more active trading overlay using the liquidity of the large cap stocks to generate interim returns while the core positions play out.

The fund is open to professional rather than retail investors; it trades monthly on the first business day of the month. As already mentioned, it requires a minimum initial investment of £10,000 and has one month’s notice for redemptions.

Why was the fund launched? Was it to serve a particular type of need and if so, what?
The fund launched in September 2012. My ambition was to switch from an absolute return approach to an absolute return which is more appropriate for a highly cyclical sector like real estate.

What sort of investors are being targeted by Clerkenwell, and why?
Principally high net worth individuals, family offices, early stage fund investors  and investors already familiar with investing in the property sector, both listed and direct. This is primarily because the aim is to manage a focused, relatively small fund, and our target assets at £50 million is too small for most more institutional investors

Please set out Clerkenwell's views on the property markets it operates in
The investment universe is pan European listed real estate with the flexibility to invest in real estate related areas like house building and companies which provide services to real estate like estate agencies. The fund has done very well out of the London commercial market but the market is plateauing ahead of the Brexit vote [on 23 June] and exposure has been brought back to a couple of special situations.

There is a bubble at the top end of the London residential market which is in the process of bursting and the fund has a small short exposure here. The fund’s largest position is a Swedish residential investment company. This is a market in structural undersupply where assets can be purchased at a material discount to replacement cost, where values are supported by negative interest rates and where there are opportunities to sell rented flats to their tenants, crystallising a significant uplift. The fund has exposure to Dublin which is the most attractive commercial real estate market in the eurozone (and a potential beneficiary of Brexit). The fund also has exposure to mid-priced residential development land. I have a strong belief that small/mid cap stocks with entrepreneurial management outperform the large caps over the medium term and the fund has a structural bias towards small/mid cap stocks and to markets which have an entrepreneurial spirit. The large caps have a role in adding thematic exposure but with the sector currently trading rather than trending the fund currently has no long exposure to the large caps.

How does it see property as an asset class overall in terms of what investors need and require?
In the current low-interest rate, low-growth, low-inflation environment real estate is attractive to a wide range of investors, particularly those seeking to match long term pension liabilities. That said, the cyclical recovery from the 2009 lows is now long established and highly developed in a number of locations, most notably London.

However, absent a major reversal in interest rates, there is no obvious trigger for a down turn in real estate. Some markets, such as Dublin, are benefiting from monetary policy which is inappropriate for the underlying economic conditions. Other markets are still at an early stage in their recovery, for example, Spain and Italy.