The situation with trusts is more segmented, with the AIC sectors spanning five sub-categories: Direct Asia Pacific, Direct Europe, Direct UK, Securities and Specialist.
For comparative purposes, Money Management has grouped funds and trusts together to identify the top performers, but this does come with a caveat.
As funds and trusts can vary wildly in geographical, volatility and strategic terms, returns can be disparate. Some managers opt for consistency whereas others take a more racy approach.
The fundamental dividing line between investment approaches is more simple: some property funds invest in physical real estate, but others buy property companies such as housebuilders and related firms.
Table 1, which shows the top-20 funds and trusts over the past five years, indicates that both types have managed to produce sizeable returns over the period despite the hit to valuations seen last summer.
The year to 1 August 2016, which incorporated this drop, is the only 12-month period of the past five where the average fund failed to hit double-digit growth. Even so, the typical portfolio increased by 8.7 per cent.
Digging beneath the data and focusing on individual funds sheds more light on the disparity between different styles and fund structures.
Evidently, closed-ended managers have fared better than their open-ended counterparts, taking 15 of the top 20 places. This is in spite of a universe of 50 property funds compared to just 32 property trusts.
The majority of funds and trusts analysed have a clear preference for UK properties, but greater success has been found elsewhere.
The standout performers
Standing head and shoulders above the rest is the Taliesin Property trust. Since its inception, its risky approach has yielded substantial year-on-year growth, supported by the fact that even in its least fruitful period of the past half decade (2014-15), the fund still grew by 19 per cent.
In addition, average annual growth of 31.7 per cent over five years is almost 9 per cent higher than the next best performer: Picton Capital’s Property Income trust.
However, the Taliesin trust would tend to suit only specialist investors. The portfolio aims “to achieve capital growth and income via investments in residential property in Berlin and other cities in the east of Germany.”
Berlin, and Germany in general, has been particularly lucrative for property investors since the 2008 crash. A sharp increase in the number of people buying properties instead of renting has been a key factor in driving up prices.
In a report by PwC entitled ‘Emerging Trends in Real Estate, New market realities: Europe 2017’, German cities occupy four of the top five places in terms of overall prospects for the remainder of 2017.
