When it comes to investing in the property equities market it is understandable that some remain nervous.
And while it is good to see UK house prices on an upward trajectory – rising 1.1 per cent in April, according to the Halifax House Price index – this doesn’t necessarily mean the sector, which was at the heart of the financial crisis, is out of the woods yet.
Since the run on Northern Rock on September 15 2007, the IPD UK Property index has lost 8.17 per cent. In fact, the index has a significant way to go before it can be said the market has ‘recovered’ from the crisis that saw it fall 36 per cent from the day the northern bank collapsed.
For property securities funds, however, a slightly more positive picture can be painted – although the good performers aren’t UK property funds.
The top-10 best-performing property securities funds, based on five-year figures, consist of eight ‘global’ funds and two Asian property funds, with the Henderson Horizon Asia Property fund coming out on top with a 56.99 per cent return to date, according to FE Analytics.
First State’s Global Property Securities fund is a close second with a return of 52.56 per cent, compared with an IMA Property sector average of 5.46 per cent.
Manager Stephen Hayes, who took over in September 2012, has, like a number of other managers with a global remit, been increasing his exposure to the Japanese market following the announcement of its quantitative easing policy on April 4 2013.
He tells Investment Adviser’s Nyree Stewart: “The Bank of Japan’s announcement of a 2 per cent inflation target and subsequent ramp up in their bond-buying programme have influenced the portfolio’s increased Japanese exposures.”
Similarly, Kay Herr, portfolio manager on the JPM Global Property Securities fund has increased the fund’s exposure to the Japanese market.
According to the fund’s latest factsheet, the vehicle has 16.3 per cent in Japan, the second largest exposure in the fund behind the US at 44.6 per cent.
Manager Kay Herr says: “Looking at the three-year attribution on the fund, outperformance came from positive stock selection in the US and Japan.”
But UK-focused property securities funds remain under significant pressure, with all of them underperforming both the IPD UK Property index and the IMA Property peer group. The best, with a loss of 0.79 per cent in five years, is the Threadneedle UK Property fund managed by Don Jordison and Chris Morrogh.
It is clear that investor confidence has yet to return to the property market, but when it does advisers would be wise to allocate to those funds with a global remit, rather than a product focused on a particular market.
THE PICKS
Aberdeen Property Share fund
This fund has recovered well following the housing market crash of 2007/08. In five years it has lost 0.26 per cent, but based on both three-year and one-year numbers, the fund has bounced back into the top quartile.
M&G Global Real Estate Securities fund
Spanning both three and five years, this £101.1m fund has produced top-quartile returns. But it has slipped into the second quartile based on its one-year performance. Manager Gillian Tiltman has 33.1 per cent in the US, with a further 14.9 per cent exposure to Hong Kong’s property market.
EDITOR’S PICK
Henderson Horizon Asia Pacific Property Equities fund
Managed by Tim Gibson, this fund has a very good track record. Three-year performance figures have dipped into the second quartile with a 46.48 per cent return. However its five-year return of 56.99 per cent and one-year return of 58.45 per cent saw it top the IMA Property sector.
