Data from FE Analytics shows that global property funds dominate the list of top-performers in their sector over three and five years, having rebounded faster from the crash of 2008 than their UK-focused rivals. Hollands (pictured) says he expects this run to continue this year.
"At the moment we are quite cautious on UK commercial property. As the recent Autumn Statement confirmed, the outlook for growth in the UK remains weak."
"The weak economy means that void periods (when properties are empty between tenants) have been on the rise and that means it is difficult to raise rents in the current environment," he explained.
"Additionally, a large pipeline of property loans is due for refinancing over the next two years, so we have some concerns that banks will refuse to extend credit on viable terms. This could create uncertainty over capital values."
All 10 top-quartile funds in the IMA Property sector over three years are globally focused, as are seven out of the eight top-quartile funds over five years.
The exception is Henderson Horizon Asia Pacific Property Equities fund, which is the eighth-placed portfolio over that time.
By comparison, the best results for a UK-focused property fund over three years are those of Royal London Property, which has made 19.67 per cent in that time and just 3.66 per cent over five years.
First State Global Property Securities leads the way over three years, with returns of 49.71 per cent, and the fund is second-best over five years, with returns of 39.56 per cent.
Performance of fund vs sector over 5-yrs
Source: FE Analytics
Hollands points out that the global funds invest in the securities of other property companies, meaning that they behave more like equity funds rather than like those that hold physical property. This means they tend to have a higher volatility.
In this area Bestinvest likes Schroder Global Property Securities and Schroder Global Property Income Maximiser.
Schroder Global Property Securities is a top-quartile performer over five and three years, making 38.92 per cent over the latter period.
It has, however, been outperformed by its FTSE EPRA NAREIT Developed index, which has made 48.07 per cent in this time.
Performance of fund vs sector and index over 3-yrs
Source: FE Analytics
The fund is only yielding 0.65 per cent according to FE Analytics, making it inappropriate for those who look to property for the income part of their portfolio.
For such investors, Hollands prefers the sister fund Schroder Global Property Income Maximiser, which is currently yielding a healthy 6.59 per cent, according to our data.
Since launch in February 2011, the fund has slightly underperformed the other Schroders portfolio and the benchmark they share, although its returns of 15.34 per cent are not far behind the 18.3 per cent of the sister fund.
Performance of funds vs sector and index since Feb 2011
Source: FE Analytics
Hollands commented: "Both are managed on a sub-advised basis by Jim Rehlaender at European Investors Incorporated (EII), but the income version uses an option-writing strategy similar to that used on the Schroder Income Maximiser fund."
"EII are a specialist property investment boutique operating principally out of New York and Amsterdam but also with officers in Munich and Singapore."
Data from FE Analytics confirms the extra volatility of the global funds.
Schroder Global Property Securities has a three-year annualised volatility of 14.59 per cent, while sector-leading First State Global Property Securities scored 14.33 per cent.
The two top-performing UK funds over three years – Royal London Property and Henderson UK Property – score 2.47 and 5.4 per cent over the same period.