Best in class: TR Property Investment Trust

How does a return of 1,824.68 per cent sound over two decades?

It is not bad when you consider we have had a global financial crisis, a tech bubble, a crisis in the eurozone and the uncertainty of Brexit in that time.

In real terms it would mean a £10,000 investment would now be worth a staggering £192,468.18. Something not to be sniffed at in any environment.

This week’s Best in Class can lay claim to being the best performing actively-managed investment trust since the turn of the millennium.

The TR Property Investment Trust has a history dating all the way back to 1905, although it became a real estate specialist vehicle in 1982.

Mr Phayre-Mudge generally regards future growth and capital appreciation potential more highly than immediate yield

It invests in shares of property companies of all sizes, predominantly in Europe and the UK.

The trust is managed by Marcus Phayre-Mudge with Alban Lhonneur as his deputy.

The pair also run the Elite Rated BMO Real Estate Securities fund, as both brands are owned by Bank of Montreal.

Mr Phayre-Mudge is a qualified chartered surveyor and has a Bachelor of Science (Hons) in Land Management from Reading University. He has been involved in property investment since 1992.

Mr Phayre-Mudge analyses how economic policies will affect property as an asset and individual property companies.

He makes full use of all the members of his team to ensure every investment opportunity receives in-depth attention.

Investment selection

The investment selection process seeks to identify well-managed companies of all sizes.

Mr Phayre-Mudge generally regards future growth and capital appreciation potential more highly than immediate yield or discount to asset value.

Technically, the trust can invest anywhere in the world but, in practice, the focus - and the trust’s benchmark - is a pan-European index, the FTSE EPRA/NAREIT Developed Europe.

Although the trust primarily buys property shares, the team will also have around 10 per cent of the portfolio in physical property.

This is so they will always have first-hand information about the state of the market.

The trust has limitations for access to each sector within the property market.

These are: UK listed equities 25 per cent to 50 per cent; continental European listed equities 45 per cent to 75 per cent; UK direct property 0 per cent 20 per cent; other listed equities 0 per cent to 5 per cent; other listed bonds 0 per cent to 5 per cent; and unquoted investments 0 per cent to 5 per cent.

The board will also hold a maximum of 15 per cent of the portfolio in listed closed-ended investment companies. 

As mentioned, the trust invests primarily in property company shares, with up to 10 per cent exposure to physical bricks and mortar.

As a result, it is not only exposed to fluctuations in commercial property prices, but also to stock market volatility.

By contrast, however, this structure gives the trust more liquidity, a hot topic in the property market at present.

The trust is well diversified from a sector perspective, with residential (31.7 per cent), offices (29.7 per cent) and industrials (25.5 per cent) all well represented.

The trust has its largest individual holding (10.9 per cent) in German listed property company Vonovia - which owns over 350,000 apartments across Germany.

Its second largest holding (7.8 per cent) is in Unibail-Rodamco-Westfield, the Paris-based European commercial real estate company.

Net gearing currently stands at 12.3 per cent, although the trust can gear up to 25 per cent. The share price has tended to trade at a discount to net asset value (NAV), however it has recently moved to a premium. It also offers an historic yield of 3 per cent.

The trust has an ongoing charge of 0.76 per cent.

There is also a 15 per cent outperformance fee of its benchmark plus 1 per cent hurdle.

Long-term return

Investors need to understand that while the share price may be volatile, this has been more than offset by the trust’s long-term returns, which importantly, have been demonstrated in various market conditions.

The TR Property Investment Trust team is one of the largest pan-European real estate equity teams.

All in all, this makes a compelling argument for those looking at property as an alternative source of return and income, whether it be shares or physical.

We see no reason why this trust can not continue to produce standout performance in the future.

Darius McDermott is managing director of FundCalibre