And despite the top prices that luxury homes have been fetching lately, the bank, Societe Generale (SG), expects strong returns for investors ahead.

It expects annual yields of 12 per cent to 17 per cent over the next three years - and sees capital appreciation rather than rentals as the main source of growth.

The fund is the first of its type in Singapore. It is somewhat like a mini-real estate investment trust, though which the properties are held for three years.

SG hopes to raise US$100 million (S$151 million) through the Singapore Prime Residential Fund, launched in February, which will be invested in freehold condominiums that cost more than $1.5 million each.

SG Bank & Trust's Singapore branch chief executive, Mr Pierre Baer, said the fund is one way to tap into Singapore's growth as a financial and international centre.

'The Government's efforts to build Singapore as an international global city will attract expatriates and result in serious immigration across Asia including India,' he said.

Mr Baer is also bullish on other plans to enhance Singapore as a medical and education hub, including a recent announcement of a potential population increase to 6.5 million and the upcoming integrated resorts.

And there is a shortage of luxury residential properties which will be met only in two years' time so it is 'very safe to make a good investment' with the fund.

Singapore is riding a wave of property price recovery, with new prices breaching even the $4,000 per sq ft levels around the prime Orchard Road area.

According to SG Bank & Trust's managing director and global head for Japan, Mr Keiichi Hirano, the fund is a response to Japanese clients who want a slice of the Singapore growth story.

Although the first tranche of the fund is denominated in yen, SG has plans to start Singdollar and US dollar tranches, which will also be invested in prime Singapore properties.

The fund will be invested in condominiums in prime districts such as 9, 10 and 11, and they should come with a tenancy agreement that gives a minimum rental yield of 2.75 per cent a year.

But rental is not the prime criterion for the fund, which is looking primarily at capital appreciation of these properties and the appreciation of the Singdollar against the yen.

The first tranche has so far raised US$20 million, which has been invested in 10 to 15 condominiums.

Although it is a three-year closed-ended fund, SG has the option of redeeming it early or extending it for another year.

To qualify as an SG client, you must have a minimum of US$1 million in investible assets with the bank. To invest in the fund, a minimum sum of US$500,000 is required.

Investors pay a annual management fee of 1.5 per cent and the fund pays a performance fee of 20 per cent to the investment manager Pacific Star Group, if certain criteria are met. Property specialist Pacific Star is tasked with the selection and management of properties in the fund.