Rated funds: Top five property investments
10th June 2013 10:14
by Helen Pridham from interactive investor
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A few years ago investors started piling into commercial property funds as the market values of offices, shops and other types of business premises rose. It looked like prices would go on rising forever. However, the financial crisis led to a slump in commercial property prices, hurting many investors.
After five years in the doldrums, commercial property is looking attractive again, particularly for income seekers. Yields of 8% are on offer from investment trusts with direct property holdings.
Click each fund chart on the right-hand side for an expanded version.
To find out more about the methodology, read: How Money Observer's Rated Funds were chosen.
Winner: Smaller fund, Property
This fund seeks to invest in two distinct types of property companies - those with assets that are "prime today" and those with assets that are "prime tomorrow". Manager Gillian Tiltman believes this structure should allow the fund to generate attractive performance regardless of the economic backdrop.Part of the fund's outperformance in recent years, which has seen it scoop a 2013 Money Observer Fund Award, has come from the stable, inflation-protected cash flows resulting from index-linked rental agreements in the property sector. Investors also benefit from an attractive income return.
This was one of Money Observer's 2013 tips. It holds prime UK commercial property and is considered the most defensive of property trusts. Its portfolio is biased towards London and the south east, so it has benefited from overseas investor support for prime London property.
This fund is an Editor's Choice. It invests in a broad portfolio of property shares globally. Money Observer likes First State's strong property investment team, led from Australia by Stephen Hayes, which believes world property markets are highly dependent on local economic conditions and bases its judgements on region-specific forecasts.
Winner: Larger fund, Property
Highly commended: Value for money
A winner of Money Observer's 2012 and 2013 Best Property Funds award, this fund is managed by Michael Barrie and Matt Jarvis and mainly invests in physical property. It aims to maintain a balanced portfolio representative of the UK property market as a whole.
Managers strive to find the right strategy in each sector and then track down the properties they feel can best add value.
This trust was one of Money Observer'sinvestment trust tips for 2013. It has been selling some low-yielding properties to pay off debt but is expected to refinance remaining debt in 2014, thereby reducing costs and improving its dividend.
These improvements coupled with its portfolio's heavy bias to the south east and London's West End should revive the trust's prospects.