Job Curtis, who manages the £1.3bn City of London investment trust, has increased his exposure to housebuilders, despite tumbling share prices and the overriding sense of concern about the sector.
The Henderson-owned trust has nudged up its holdings in two housebuilding firms, Persimmon and Taylor Wimpey, despite Mr Curtis admitting they had dented the performance of the portfolio.
Housebuilding firm the Berkeley Group recently fell victim to the tricky markets, and was the only company to be kicked out of the FTSE 100 index following the London Stock Exchange's quarterly reshuffle.
Property funds have also struggled of late, as a number of large investment vehicles paused trading following a surge of redemption requests from investors.
However, Mr Curtis has gone against the grain by buying into the property sector.
He said the sector has struggled during the year ending 30 June, after being one of the best performers over the previous 12 months.
“At the beginning of the year, people said housebuilders have done as well as they can possibly do and reached a peak of profitiability,” Mr Curtis said, adding this spurred investors to “take some money off the table”, which caused shares to underperform slightly.
The day after the EU referendum, Mr Curtis said investors took a negative view of all UK domestic stocks, and both Persimmon and Taylor Wimpey’s share prices took a big hit.
However, in the months following the Brexit vote, he said the markets got over the initial shock and rapidly recovered.
“We met with both these companies in July because we were very worried about the falling share prices,” he said, adding however the two housebuilders then went on to announce positive trading updates, prompting him to boost his holdings in both companies.
The trust manager said: “I am still firmly positive about the housebuilding sector; the UK hasn’t been building enough houses over the past few years.
“Both these companies have enough land to build for at least another five years; they have strong balance sheets, net cash, and low interest rates.
“I think the ingredients are there for the housing market to continue to do reasonably well, and it doesn’t need house prices to go up, but to be relatively stable, which is what I would expect.”
Mr Curtis said he expects these companies to remain profitable: “This will be a good area for dividends going forward, and I think returns should be a lot better this year.”
According to FE, the City of London trust has outperformed the UK Equity Income sector consistently over the past three years, returning more than 23 per cent, against the peer group average of 15.6 per cent.