Henderson Global Investors’ Ainslie McLennan has consolidated her asset base as the UK Property fund she manages soared in value.
The £3.9bn UK commercial property vehicle started 2015 almost 50 per cent lower in value, and while the number of properties in the portfolio has increased, this has not matched the acceleration in the fund’s value.
Henderson said the fund had 125 properties at the end of September 2015 compared with 84 a year earlier, in spite of its value increasing by 71 per cent, according to FE Analytics data.
Ms McLennan said there had been strong inflows from retail investors looking to diversify away from fixed income, meaning it could buy higher-value properties.
The manager, who co-runs the portfolio alongside Marcus Langlands Pearse, said consolidating the fund was now a long-term objective.
“We have been able to diversify the scale of the assets we hold,” she said.
“Our average size historically was £15m and now it is £25m. Some of the assets are sitting towards £200m and some at £5m, so you get a bigger win when you deliver performance.”
Ms McLennan said she had sold 10 assets and used the cash to buy just two, while also turning £90m of stock into £500m using inflows and setting out five-year business plans.
She said this allowed her team to spend more time on asset management, which would secure greater income streams than just “hoping” the asset achieved capital growth.
The team runs weekly analysis on projected inflows, allowing it to keep a secure pipeline of assets to use up new cash, the manager explained. The fund holds around 14 per cent in cash, FE Analytics data shows.
The vehicle is structured as an Oeic and provides daily liquidity. She said this was a significant consideration when choosing assets.
The portfolio remained overweight London and South East and had 67.1 per cent in the region at the end of September, a 2.7 per cent percentage point increase in 12 months, according to Henderson.
Ms McLennan added: “We always have half an eye on liquidity. If people start to think bonds are attractive again and money moves from property, we are well positioned and can maintain a quality portfolio.
“From experience and going through the [2008] financial crisis, it was London offices and South East industrials that remained the most liquid assets.”
In the future, the manager sees capital growth subsiding and rental income being a key focus once again. The fund will continue to target London and the South East, with a bearish view on other regions.
In spite of positive sentiment from the government on the “northern powerhouse”, Ms McLennan has not bought big office holdings in Leeds or Manchester. The one property in the latter disappointed from an occupier perspective, she said.
“There is a lot of supply [in the North] and it doesn’t drive rents forward,” she said.
“In London, we are seeing strong rental growth driven by occupier demand.”
The fund holds 21 per cent in the North and Midlands, with sector splits on retail, offices and industrial. It has 28.6, 27.8 and 16.3 per cent in each respectively, according to Henderson.
The fund has returned 26.4 per cent in the past three years, while the IPD UK All Property index has increased by 46.5 per cent, FE Analytics data shows.
