UBS Global Asset Management (China) is to start a fund that invests in Shanghai’s public rental housing market, the first investment fund of its kind in China, tapping the expected rapid growth of this market, the firm said.

The rollout of the fund comes at a time when, with the latest five-year plan, the Chinese government is seeking to build around 36 million social housing apartments between 2011 and 2015.

The asset management arm of Switzerland’s biggest bank is setting up the fund with  Shanghai Hongkou Public Rental Housing Investment and Administration Co, Taiping Asset Management Co and UBS SDIC Fund Management Company.

The fund, which is a private equity closed-end vehicle, will invest in developed public rental residential properties in the Hongkou district, a prime residential community in Shanghai with strong rental demand, UBS said in a statement.

Taiping Asset Management, a subsidiary of China Taiping Insurance Group, is the lead private investor in the fund. UBS Global Asset Management (China) and UBS SDIC are the fund's investment manager and advisor, respectively.

When conditions and the regulatory conditions allow, the fund will be converted into real estate investment trusts to be publicly listed in China.

“Investors in the fund have access to a stable cash dividend payout as well as to potential asset appreciation. The fund is a working example of our ability to combine international expertise with local knowledge, “ said Xinyuan Ling, China chairman of UBS Global Asset Management.

“This underscores our commitment to broaden our business model in Asia Pacific, and the establishment of this new asset class in China is significant as the model lends itself to being rolled out elsewhere in the country to support the Chinese Government's public rental housing plan,” said Kai Sotocorp, APAC Head of UBS Global Asset Management.

Chinese developers have been seeking different ways to finance projects amid the government’s efforts over the past three years to curb the property market. Share sale plans announced by developers including Xinhu Zhongbao Co. and China Merchants Property Development Co. (000024) this month reinforced expectations that regulators will ease limits on fundraising by developers as slowing economic growth spurs adjustments to the tightening policies, according to Bloomberg.

The country doesn’t have publicly traded REITs. China Securities Regulatory Commission will release draft rules on such products for public feedback, according to China Business News earlier this year.