The manager of the five-strong Fusion range has added a 4 per cent weighting to the product in his JPMorgan Fusion Balanced fund, citing “attractive” yields and the asset class’s sensitivity to improving UK economic growth.
The Fusion Income and Fusion Conservative funds already have exposure to the M&G fund, which is managed by Fiona Rowley.
Mr Lanning follows Jupiter’s Merlin multi-manager team, led by chief investment officer John Chatfeild-Roberts, who in March struck a deal with direct property boutique Mayfair Capital to run a bespoke mandate for the Jupiter Merlin Income and Jupiter Merlin Balanced funds.
Mr Lanning said: “We continue to increase exposure to UK commercial property on the belief initial yields look attractive relative to the risk-free rate, and underlying rental growth and occupancy rates should be supported by stronger UK growth.”
The M&G Property Portfolio fund last year converted to a property authorised investment fund, or Paif – the first UK retail offering to do so – to provide a more tax-efficient income stream from its portfolio of direct commercial property.
Since launch in June 2009, taking in much of the post-crisis equity rally and initial property market recovery, the fund has gained 32.4 per cent compared with an average 54.9 per cent in the IMA Property sector, according to FE Analytics.
Elsewhere in the Fusion funds, Mr Lanning has been adding to Japanese and US equity holdings, as the two markets have sold off in recent weeks. Japan has been especially weak in 2014 so far, as investors have lost faith following the government’s introduction of a consumption tax.
The Nikkei 225 index has fallen 13.9 per cent in local currency terms so far this year, according to FE Analytics.
Mr Lanning said: “2014 has so far proved a tougher period, with some of the major drivers of last year’s returns, such as Japanese equities and US growth stocks, giving back some gains.
“The heavy selling by foreigners of Japanese equities has cleared much of the froth out of the market and allowed us to increase exposure at lower levels through the Polar Capital Japan fund.
“In the US, the vicious rotation from growth to value has resulted in us increasing exposure to managers such as Edgewood US Select Growth and JPMorgan US Growth.”
Since launch in March 2013 the five Fusion funds have returned between 3 and 5 per cent, and together have raised roughly £30m in assets.
Rathbones’ Coombs opens door to property
Rathbones head of multi-asset David Coombs is another fund selector buying into property.
He has opened a position in the £357.2m Schroder Real Estate Investment Trust run by Nick Montgomery and Duncan Owen – the first time the Rathbone Multi-Asset Total Return fund has held the asset class.
But unlike his peers, Mr Coombs is less convinced that commercial property is cheap.
“There’s a 5.3 per cent yield on commercial property, which I don’t think is very good,” he says.
“Outside of London it is more correlated to equities and the equity cycle – there may be a lag but there is definitely a link – and so you would normally expect a premium.
“It’s like saying equities are cheap compared to bonds – it’s a case of ‘yes, but’. Property is okay but it is not cheap.” The manager cites a “normal” risk premium of 4 percentage points over government bond yields as suggesting property should yield roughly 6.7 per cent.
