Getting the best property fund for my client

Mr MacTruong says: “Does the fund management team have a good track record? How long have they been delivering good returns? Have they delivered in differing market conditions?

“For a ‘bricks and mortar’ fund, are they supported by an active transactions team who have access to the market on and off?

“Then you need to look for value added initiatives from the fund manager and ask them about their active asset management, what will they do to increase the value of their buildings?

“What’s the fund’s void rate against peers, and is it rising? Maintaining low void rate indicates good portfolio management and a high or rising void rate could indicate some underlying portfolio issues.

“What is the average lease length of the portfolio? This is always a good question to ask; a fund manager with the ability to negotiate long contracts on favourable terms can help you get the most from your investment.”

Mr MacTruong says advisers should also ask about sector weightings and geography to decide if the fund is suitable for their client’s risk, income and portfolio diversification needs.

Also he says advisers should ask questions to determine the tenant risk in a portfolio; for example, the top tenants’ concentration exposure will help you to decide if the portfolio is too dependent on a small number of tenants – if so, this could be an indicator that the investment carries greater risk.

Finally, he says advisers should ask what emphasis the fund manager places on property sustainability against industry benchmarks.

Green initiatives can make an enormous impact upon the environment, which is beneficial from a social responsibility point of view, but Mr MacTruong warns high levels of sustainability can also affect the long-term value of a property, and therefore protect the value of a portfolio.

For investors looking for a fund which will deliver total returns consistent with the market over time, Chris Ludlam, head of real estate capital for Schroder Property Investment Management, says advisers should ask the following questions:

1) What is the fund’s objective?

2) What has been the performance of the underlying property assets compared to your competitors and your benchmark?

3) How much liquidity do you need?

4) What is your charging structure?

5) What size is the fund and what is your maximum capacity?

6) Do you favour income or capital growth as an investment style?

7) What is your historic turnover of assets?

8) In normal circumstances how will your portfolio be structured?

9) What is your distribution yield, net and gross of tax?

10) How much cash do you normally have in the portfolio? And how much cash do you have now?

11) How much exposure do you have to property securities?

12) What is the pricing mechanism of the fund, and where is the fund trading now?

13) What is the history of inflows and outflows of the fund?

14) How many investors are there and what is the concentration of ownership by registered owner and investor group?