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By Nick Reeve | Published Jul 02, 2012

L&G’s Barrie buys higher yielding assets

Legal & General Investments’ Michael Barrie is reducing the cash holdings in his £676.4m L&G UK Property fund and is buying higher yielding assets.

Mr Barrie, who co-manages the fund alongside Matt Jarvis, said steady investor inflows into the fund had enabled it to make £65m of new acquisitions in the past six months, in spite of low volumes of transactions in the market overall.

The fund held 28.2 per cent of its assets in cash at the end of April – a notably bearish weighting – but since then the managers have completed several deals which have brought their cash weighting down to just more than 20 per cent.

The new deals include leases on two Waitrose supermarkets, an industrial estate primarily leased to British Airways and a property in Coventry leased to Aston Martin.

Several of these recent deals were chosen mainly for their high yields, Mr Barrie said, but he was also looking to add properties with fixed rental uplifts as natural growth in rent rates was not strong.

Volumes of transactions in the market have slowed in recent months, the manager added, meaning investors had to be “very selective” when building a property portfolio.

“We’ve been stockpicking for the past three years, and have shaped the current portfolio during the property recovery phase from 2009,” he said.

“We have to have strategies for different outcomes because anything could happen. We can feel there is a lack of confidence in the market at the moment but we have a good source of income and have built up good resilience in the fund.”

Mr Barrie also predicted more real estate coming on to the market as banks offload assets.

“Banks are less accommodating to the renewal of debt agreements, so they are likely to bring more volume to the market,” he said.

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