Aberdeen: Outlook for property is ‘uncertain’

Investors in Aberdeen’s £176.2m Property Share fund should not expect the same performance they have enjoyed in the past three years, manager Sanjeet Mangat has warned.

The fund – a member of the Investment Adviser 100 Club of outperforming funds and providers – has delivered a return of 63.4 per cent in the three years to August 13, according to data from FE Analytics, putting it top of the IMA Property sector for the period.

But Ms Mangat said performance would “probably be more steady” in the future, given that the easy money had already been made in property equities.

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“Valuations have been more attractive in recent times, but now the discounts to net asset value [NAV] have largely closed and the stocks are trading around or above NAV,” she said.

The property sector was badly hit during the financial crisis and the Aberdeen fund, along with several of its peers, lost more than half of its value.

However, a subsequent recovery was sparked by a flight to high-yielding asset classes from investors pushed out of fixed income by low yields.

The influx of money has boosted share prices and driven down the yields on offer, but Ms Mangat said she did not think there would be much further yield compression in the sector, adding that “yields still look pretty attractive”.

But, in terms of growth, she said the outlook for the sector was “pretty uncertain”.

“Things look pretty weak for the market overall – it’s hard to find areas of growth,” she said.

Ms Mangat is concentrating on prime assets in locations such as London and the South East – areas that held up better during the downturn and have proved resilient in tougher times.

“A company like Shaftesbury has its assets in central London, [in areas] such as Covent Garden, and it has not seen any evidence of recession; it does not really matter what the economic data is,” she said.

The recent performance of the fund has, in large part, come from housebuilders, the manager added, which have rallied in the past 18 months. Ms Mangat said she had been taking profits from the stocks recently as valuations have increased.

She is now looking at prime assets that have at least some development growth in the pipeline, which she said was hard to find with few new developments coming on stream across the country.

In five years the fund is up 24.4 per cent, according to FE Analytics, compared with the IMA Property sector’s average return of 12.2 per cent.