Discretionary managers are getting increasingly upbeat about the prospects for the UK and have been increasing their exposure to property, as well as UK equities.
The pick-up in economic growth and the positive outlook for the UK has led discretionary managers to add to their holdings in commercial property, which should benefit from an increase in economic activity.
James Calder, research director at City Asset Management, said he had been adding to UK equities “at the edges” of his portfolios so far this year, but he said a bigger trade that he was looking to put in place across his discretionary portfolios was to add to commercial property.
He said: “I am positive on the outlook for the UK economy and commercial property tends to do well in that environment.”
But he said that accessing property at the moment was a challenge, because the big investment trusts that he would normally choose – the UK Commercial Property Trust and F&C UK Real Estate Investment trust – were both trading on high premiums to their net asset values.
Rather than looking to invest in prime London property, Mr Calder said he wanted exposure to the secondary market, outside of London, but said there were few funds targeting that area.
He has chosen the £555.7m Threadneedle UK property fund and said he would be adding the fund to a wide range of portfolios in the next month.
Jim Wood-Smith, chief investment officer at Hawksmoor Investment Management, said that while he also wanted to buy into commercial property at the moment, he could not find the right investment vehicle.
He said many investment trusts were trading on too high a premium and he ruled out investing in open-ended property funds due to concerns such as liquidity.
Although equity markets have endured a volatile start to the year, the discretionary managers also said they had been taking advantage of market pullbacks to add to equity positions.
Mr Wood-Smith said he was “dipping a couple of toes” back into the equity market after the recent sell-off to top up his equity holdings.
In order to exploit this, he said he had recently begun buying into the WDB Oriel UK fund, which concentrates mainly on the large-cap portion of the UK equity market.
Gemma Godfrey, head of investment strategy at Brooks Macdonald Investment Management, said the firm had been adding to the UK so far this year because the market has been a “laggard” compared to the rallies in the US and Europe in 2013.
