Property funds offer investors access to an earnings stream that is less correlated to the rest of the market as other assets, and as the recovery takes hold, this area should offer many opportunities for growth, particularly in the emerging world.
M&G Property Portfolio
With just a shade under £2bn of assets under management, the M&G Property Portfolio is one of the few giants in the sector.
Data from FE Analytics shows that it has beaten the IMA Property average over one and five years, but with returns of 25.12 per cent over three years, it has lagged its peer group's 39.06 per cent return over this period.
Manager Fiona Rowley has a focus on both income and growth and invests in a large portfolio of commercial property spaces in the UK. The fund’s exposure is split evenly between retail, warehouse, office and industrial space.
In Tesco, Travelodge, Debenhams, B&Q, House of Fraser and HSBC, the fund boasts some top-quality companies among its largest tenants. While the UK economy is destined for several years of low growth which may act as a drag on the fund's total return, having reliable tenants and prime properties should help to weather the storm.
The portfolio’s one-year historic yield of 3.06 per cent is above average for the sector.
Source: FE Analytics
Aviva Investors Property Trust
This £1.8bn trust is the second most-viewed fund from the sector on FE Trustnet. The portfolio is made up of a combination of bricks and mortar investments and holdings in collectives.
Its 45 per cent weighting in retail property is significantly more than its peer group and our data shows that it has under-performed the sector average over the last three and five years against a tough backdrop. It has a one-year historic yield of 2.7 per cent.
"Although UK commercial property is still delivering positive total returns, just, the market continues to slow markedly,” said manager Philip Nell in his most recent report.
"Recent returns have come entirely from rental income, with small falls in the headline capital growth figure the order of the day."
"Outside of central London we are seeing little or nothing in the way of capital growth or of increases in rents. The retail sector remains troubled as hard-pressed consumers cut back on their spending and newspaper headlines report actual and rumoured casualties on the high street."
Income-seekers might be better off in Nell’s other property vehicle, Aviva Inv Property Investment. That fund has a better record in terms of total return and its headline yield of 5.3 per cent is one of the strongest in the sector.
Source: FE Analytics
First State Global Property Securities
With capital growth likely to remain subdued in the UK and other developed economies, the £95m First State Global Property Securities fund is well poised to take advantage of a growing property sector in emerging markets through its portfolio of REITs and other property equities.
The fund’s performance over five years has seen it top the sector and growing confidence in the world economy means its future looks brighter than its past. Returns of 95 per cent over three years are also impressive compared with 39 per cent from its peer group.
The annual historic yield of 2.68 per cent is by no means the highest in the sector but is still competitive and is high enough to complement other income-generating holdings in your portfolio.
Managers Andrew Nicholas and Marco Van Bussel have taken advantage of the recent pullback in Chinese developers to add exposure to quality companies.
Source: FE Analytics