There are 35 property funds in the Specialist peer group, sitting alongside a diverse array of funds including biotech, commodities, Russia, Latin America and financials offerings. The new peer group will contain direct property funds as well as property securities or REITs funds, and hybrid vehicles holding a combination of both. These three types of funds will each have their own subset within the sector as a whole.
Stewart Webster, manager of the New Star International Property fund, said he was among those pushing for subsets to make a clear distinction between the types of funds. “I broadly support the new sector,” he said.
“It is very important we have it but it is also important that we do it from the right basis. The key is whether the man on the street can differentiate between the types of property assets.”
Webster emphasised it is crucial investors understand which type of property fund is right for their needs: “Property balances out bigger swings in equity and bond markets so people rush out and buy REITs which are just more equities.
“REITs as a subsector of the equity market are actually more volatile than the equities so they are the opposite of what people want to be buying. You have to differentiate between the subsets or it can be misleading,” he said. Realistically, the IMA is unlikely to remove property securities funds from the sector altogether, Webster believes, but he is satisfied the current proposals are a step in the right direction.
“The optimal position is to do what they have done with a flag against the different types. Property has come of age and it is worthy of its own sector,” he said.
Cordea Savills’ COO Bill Hackney agrees the sector is a positive move, and long overdue. “It is generally a good thing, and it has been a long time coming,” he said. “The Specialist sector is a mixed bag, and there are sufficient property funds to justify their own sector.
“The fact that funds that invest in listed REITs will be bundled together with funds that invest directly is not optimal. But, from recollection, REITs are still in the FTSE Real Estate sector along with non-REITs, so it is probably the investors who want a REITs-only benchmark who are likely to have the biggest issue,” he added.
Improved transparency is one of the main benefits highlighted by Lawson Shepherd, director of sales and distribution at Invista Real Estate Investment Management.
Describing the move as ‘eminently sensible’, he said: “It was always odd that UK property funds were in a sector that encompassed gold, oil and Latin American stocks.
“Property funds are notoriously difficult to compare because investors are never quite sure what is in them. The new flagging system the IMA is introducing will make comparing like for like funds that much more transparent,” he added.
Performance of the FTSE Real Estate sector in the last 12 months
