There are many different types of property fund, from open-ended investment companies (Oeics) and UK authorised property unit trusts (Auts), to real estate investment trusts (Reits), property companies and more.
But Philip Nell, head of European retail funds for real estate at Aviva, points out advisers should remember the options for investing in property using a fund are restricted by regulation.
Mr Nell points out the rules state retail investors can only invest via open-ended, authorised funds or listed property companies.
Ainslie McLennan, manager of Henderson UK Property Oeic, says some property funds, commonly known as ‘bricks and mortar’ funds, focus on holding physical property assets.
These direct investment funds usually consist of buildings designed for commercial use, from high street retail units, department stores and shopping centres to industrial warehousing, hotels or office buildings, according to Mr McLennan.
Other funds invest indirectly, through shares in property companies or property derivatives (a complex financial instrument linked to the returns of a real estate index).
Auts and Oeics are flexible open-ended funds, where Mr McLennan says investors can generally withdraw their money when they choose by selling their shares or units back to the company managing the fund.
The unit or share price of these funds will reflect the net asset value of the underlying portfolio, divided by the number of units or shares in issue.
Elsewhere, a Reit is an investment vehicle that owns or manages a portfolio of property-related assets, either through direct ownership of property assets, mortgage debts or property shares, and are listed on the stock market.
Reits, which have been available in the UK since 2007, form a significant part of the commercial real estate markets in North America, according to Mr McLennan.
Since they are listed on the stock market, Mr McLennan says the shares may trade at a premium or discount to the net asset value, depending on sentiment towards the company.
Hugh MacTruong, proposition manager of Legal & General Investments, says the varying styles and strategies offered by property fund managers offers a huge opportunity set for investors to find a fund to match their needs.
