Henderson’s McLennan slashes retail exposure
Manager continues to reduce riskier positions in fund as investors urged to see property as an income investment.
Henderson’s £793.6m UK Property fund manager Ainslie McLennan has slashed the fund’s retail exposure and boosted cash, amid concern over the challenges facing the property market.
Ms McLennan, who runs the fund with Marcus Langlands Pearse, has reduced exposure to high street retail, a sector which is deemed more economically sensitive, to 5 per cent of the fund in recent months.
She is also now underweight the retail warehouse sector at 16 per cent of the fund and has 17.8 per cent in cash and property securities, or property equities in the form of real estate investment trusts.
“I am trying to further derisk the fund as I don’t think things will get better for quite a bit,” she said.
Ms McLennan said she had recently sold one major property as the asset was causing the fund to have a double exposure to DSG – the group that owns Dixons, Currys and PC World – as a tenant.
“I had a concern as they were in the top five tenants for income and I felt we were quite top-heavy for a company which is in a part of the market that is changing quite quickly in terms of how people shop, such as using the internet more,” she said.
“The company is still a substantial tenant in the fund but represents 2 per cent of the income now rather than 6 per cent.”
Ms McLennan said the sale had reduced her retail warehouse exposure.
The manager said the fund’s size troughed at £600m at the depths of the financial crisis, but it has now recovered strongly from those lows.
The property fund sector was hit hard by the property crisis when prices peaked in November 2007 and continued falling to their lows in 2009.
Ms McLennan said the rise in the fund’s size in recent years was due to a mix of inflows and rises in the prices of its assets.
“Discretionary fund managers are throwing money into the fund and interest from them has been there for a while,” she added.
The manager said retail investors tended to take longer to analyse the market, but they now need to view property differently to the way it was seen before the financial crisis first began.
“Everyone got used to capital growth but that has changed now and people should not be talking about property except in terms of income,” she said.
Because of this, Ms McLennan said it is important to maintain a low void rate – the percentage of properties owned by the fund that do not have a tenant.