Bricks and mortar funds exhibit greater diversification characteristics than property share funds. Property share funds can be more highly correlated to equity markets, at least in the short term, while property bricks and mortar funds will exhibit less volatility and returns will have greater correlation to the economic cycle than other mainstream asset classes.
The popularity of the commercial property market has led to fears that it is overheating, certainly at the prime end of the market. “It is a crowded trade and we are mindful of that,” Mr de Bunsen says.
The right type of property investment depends on the type of investor. Bricks and mortar is a better fit for income seekers, and those in pursuit of diversification, while securities-based funds – whether active or passive – may be best for those looking for capital growth. Equally, there are new opportunities emerging that offer a different type of return altogether.
Cherry Reynard is a freelance journalist
Niche property options – Multi-manager
The popularity of the commercial property market has led to fears that it is overheating, certainly at the prime end of the market. This has led a number of multi-managers to look at more niche options in the property market.
For example, Rob Burdett (pictured), joint head of multi-manager at F&C Investments, has recently invested in the Custodian Real Estate Investment Trust, which invests in smaller properties, worth less than £7.5m.
He says: “This is a property investment as it used to be: it gets clients wealthy slowly. It won’t take more than 15 per cent gearing, whereas many trusts take as much as 40 per cent. It is quite conservative.”
Property fund picks
ABERDEEN PROPERTY SHARE
This £306.1m fund is managed by the Pan-European equity team at Aberdeen Asset Managers and is benchmarked against the FTSE 350 Real Estate index. It has delivered top-quartile performance against its IMA Property sector peers for one-, three-, five- and 10-year periods to June 13, according to FE Analytics. Its 12-month return of 17.83 per cent is roughly double that of the sector average of 8.38 per cent.
BNY MELLON GLOBAL PROPERTY SECURITIES
Managed by CenterSquare Investment Management (formerly known as Urdang Securities Management) this is one of the smaller members of the IMA Property sector with assets of just €8.3m (£6.6m). However, it has delivered top-quartile performance in one-, three- and five-year time periods, with a 12-month return of 18.47 per cent.
TR PROPERTY INVESTMENT TRUST
Managed by Marcus Phayre-Mudge and Alban Lhonneur this £827m company aims to maximise total returns by investing in Pan-European equities and UK direct property. It sits in the AIC Property–Securities sector, however it has delivered top-quartile performance in one-, three- and five-year time periods against the constituents of all five AIC property sectors, including a 12-month return of 37.91 per cent.
