According to Philip Nell, manager of the £1.46bn Aviva Investors Property trust, central London office holdings, particularly in the West End, have offset the performance of industrial and regional retail space, as overseas investors and sovereign wealth funds have focused on central London properties to preserve wealth.
The Aviva fund, launched in September 1991, is a direct property-investing vehicle focused on the UK property market with a particular eye on commercial property. The fund is available to both retail and institutional investors.
Mr Nell notes: “Because of its investor profile, the fund has tended towards a relatively lower-risk exposure to the UK commercial property markets, looking for reasonably long-dated income streams and relatively well-secured assets in good locations.”
Mr Nell, who took over the running of the fund in September 2007, explains the investment process is very much dominated by a bottom-up approach to property investing and strategic analysis, noting: “Probably 60-70 per cent of the investment decision is from the asset up, with an overlay of a macroeconomic and financial perspective.
“We look predominately at the asset itself. We believe even if you have a case to buy central London or regional offices, it is about the individual asset; not just buying a general story.”
A further stage of the investment process is to create, annually, an asset management plan for all properties held, adds the manager. This is then reviewed every six months, while asset manager performance is benchmarked against the plans on a quarterly basis.
Mr Nell says this process, which includes keeping an eye on opportunities to add value to properties, gives the team a “very good steer about where we need to focus our energies”.
He adds: “What we don’t want is to buy when we get money coming in and sell when we get money going out. We want to make sure we are only selling assets when we think they are at the peak of their cycles and only buying them when we think there are more opportunities for it to deliver. Our average holding period is between five and 10 years.”
The discrete-year performance of the fund has been disappointing. It posted marginal positive returns in 2012 of 0.06 per cent. Year to date to April 23 2013 the fund has posted a return of just 0.5 per cent.