Sell-off spurs BMO property switch

Sell-off spurs BMO property switch

BMO Global Asset Management’s Marcus Phayre-Mudge is keen to add to his property equities at the expense of physical assets following the recent market sell-off.

The property manager, who is able to invest in both equities and bricks and mortar positions via his £163m F&C Property Growth and Income fund, said global equities’ August plummet offered a “massive buying opportunity”.

The onshore version of the fund was launched on January 30 2015, becoming the master fund into which the offshore, Guernsey-based structure fed.

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The fund had 65 per cent in property equities and 35 per cent in bricks and mortar holdings at the time of the onshore launch.

Mr Phayre-Mudge subsequently sold off some equity positions at the end of July, reducing his allocation to 60 per cent while raising physical property to 40 per cent.

But following the market downturn he took the opportunity in August to buy shares in Land Securities, the largest commercial property development and investment company in the UK.

“The sell-off in equities has presented a massive buying opportunity and we have shifted more into equities after previously buying more physical property,” the manager said.

Land Securities’ share price, which was trading at £12.92 at the start of August, dropped to £11.95 during the month.

“Land Securities sold off a great deal so we bought some of that,” Mr Phayre-Mudge said.

He added he was keen to increase his allocation to equity holdings as he thought they would fare better in a rising interest rate environment.

Elsewhere, the manager was bullish on the long-term outlook for residential property, based on strong population growth figures.

But he was concerned in the short term, as he said there had been an “explosion of apartments” being built.

He suggested a potential “capital flight from Asia” could yet offset this trend.

The F&C Property Growth and Income fund outperformed the sector in the year to September 21, losing 0.7 per cent compared with the IA Property’s loss of 3.2 per cent, data from FE Analytics shows.

BMO said the vehicle was the most popular of its six open-ended property offerings, because its split allocation was well-received by investors concerned about potential liquidity issues in bricks and mortar positions.

Mr Phayre-Mudge said he would not be concerned about the fund’s liquidity until assets reached around £400m, and he insisted he would not let the fund pass £500m in size.

BMO has already started to control flows into Guy Glover’s £267m UK Property fund to protect its existing investors.

Mr Glover is continuing to hold a significant amount in cash to protect against liquidity issues. His fund held about 15.5 per cent in cash during the summer.

The fund’s shareholder base is comprised of a large number of smaller investors, each of which holds no more than 10 per cent of the fund, according to the group.