Fund Review: SWIP Property Trust

This article is part of
Fund Review: Property

The SWIP Property Trust is managed by Gerry Ferguson who was joined by deputy manager Kerri Hunter (below) in July 2010. Ms Hunter says: “The fund’s main aim is to provide investors with a total return consistent with that of a balanced commercial property portfolio.

It invests primarily in direct property, which accounts for 75 per cent of net asset value (NAV). In order to provide the fund’s investors with a direct property return while maintaining an acceptable degree of liquidity, as well as holding cash, the fund invests in a range of alternative, property-related assets.”

The £2.9bn fund is the largest it has ever been and is also the biggest authorised property unit trust in the UK, according to the deputy manager. Ms Hunter maintains that the strategy is designed to deliver returns more closely correlated to property than cash.

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“In terms of the direct property element, portfolio risk analysis is central to the investment process and the fund combines a bottom-up and top-down approach to deliver core plus style performance for its investors,” she adds. In the belief that consistent added value comes from the bottom-up strategy, much emphasis is placed on stock selection.

Ms Hunter describes the process behind the fund as dynamic and proactive, which explains why the portfolio underwent some changes in 2010. “Until 2010, the fund held only direct property and cash. As a result of the difficulties seen in the preceding two or three years by some of the open-ended funds, the managers reviewed the strategy and changed its prospectus to widen its investment arena, introducing alternative property-related assets,” she explains.

Macroeconomic factors also have some bearing on the positioning of the portfolio, with the top-down analysis having resulted in the fund being overweight to London and the South East in the past few years. The fund has an ongoing charge of 0.87 per cent.

Performance of the fund has lagged the IMA Property sector over three and five years, where it languishes in the fourth quartile. However, it has recovered in the past year to produce top-quartile returns. According to FE Analytics, the fund returned 14 per cent in the past 12 months to June 18, against a sector average of 6.38 per cent.

“Most of the fund is held in direct property and this is the largest factor in fund return. Income return has continued to be the primary contributor, outperforming the market average, over this period [year to end May 2014],” notes Ms Hunter.

The industrial sector has proved to be the “main driver” for the fund’s direct property performance, particularly the southeast industrial segment.

But Ms Hunter remarks: “As with the market overall, the fund’s retail sector has been weakest in terms of fund performance over the past 12 months. For example, our retail warehouse in Edinburgh and shopping centre in London were among the negative contributors. However, the fund has been working to reposition these assets and we expect to see the benefit of recent capital investment to feed through to performance in the near future.”