However, the IMA Property sector has recently edged into positive territory after five painful years and many commentators think it may have turned a corner.
Anyone considering investing directly in property should bear in mind that buying and selling the underlying assets is difficult – a risk that is magnified in open-ended funds.
With this in mind, FE Trustnet takes a look at a more stable method of accessing a property revival – through closed-ended investment trusts.
F&C Commercial Property IT
Innes Urquhart (pictured), investment trust research analyst at Winterflood Securities, says this bricks and mortar trust is a strong play for anyone who is still wary of property, thanks to its strong performance in 2008.
"It’s got a high weighting to London and the south east," Urquhart said. "This prime focus really helped it through the downturn."
"It’s got one of the highest-quality portfolios of all the offshore property trusts."
The trust is the best performer in the IT Property UK Direct sector over three and five years, and is top quartile over one year.
Over five years, the trust is up 33.13 per cent, while the sector is down 13.85 per cent, according to FE Analytics.
Although it has no specified benchmark, it also beat the IMA Property sector which was up 1.87 per cent over the same period.
Performance of trust vs sector over 5 yrs
Source: FE Analytics
The trust is currently yielding 5.79 per cent, with a monthly dividend payout – making it a good choice for investors looking for a steady stream of income.
It has an annualised volatility score of 18.91 per cent, making it the most stable of the funds on this list. The FTSE All Share has a score of 17.09 per cent.
According to the AIC, the trust is trading on a premium of 4.7 per cent and is geared at 24 per cent. It carries a total expense ratio (TER) of 1 per cent.
It has been managed by Richard Kirby since 2005.
Charles Cade, head of investment trust research at Numis Securities, added the trust should be the prime choice for investors looking to gain access to the sector.
TR Property Investment Trust
Although this trust is primarily invested in shares, it has a small allocation to physical property. Urquhart says this gives the manager more flexibility.
"It’s an attractive way of getting property exposure," he said. "Its assets are more liquid and it gives you a diversified exposure to property."
Cade (pictured) added that it has a good long-term record and is a good choice for investors looking to pick up shares rather than physical assets. "They did have a handover a couple of years ago but it is expected to do well," he said.
The trust, headed up by Marcus Phayre-Mudge, is focused on property in continental Europe and the UK. It is currently yielding 3.74 per cent.
The trust has made 315.25 per cent over 10 years. Although its performance has slowed recently, it has still beaten the FTSE EPRA NAREIT Developed Europe index over one and five years, and stayed roughly in line over three.
Over five years, the trust has made 26.74 per cent, while the index has picked up 10.31 per cent, according to FE Analytics.
Performance of fund vs index over 5 yrs
Source: FE Analytics
The trust is trading on a discount of 14.9 per cent, with 13 per cent gearing.
Schroder Real Estate
Cade says that while the F&C and Thames River trusts are solid punts, he classes Schroder Real Estate as more of a wildcard – but one he is tipping for a resurgence.
"I think it offers a bit more value," he said. "Now that Schroders has taken over and cut the debt, we don’t see as big an issue in that."
"It has a good manager and a good, strong team. With the combination of value and yield, it looks quite attractive."
The trust has the highest yield of any on the list – and significantly higher than the majority of fixed income and equity income portfolios – at 9.08 per cent.
Investors in this trust need to have a stomach for risk, however. Its annualised volatility of 47.94 per cent is more than twice the FTSE All Share's and is the highest of any trust on this list.
It is currently on a massive discount of 16.7 per cent. It is relatively highly geared, at 41 per cent, according to the AIC.
The trust took a hit in the credit crunch, which is why it is down 15.97 per cent over five years.
It has come back over one and three years, however, outperforming the IT Property Direct UK sector over both periods.
It has 50 per cent of its assets in commercial offices. The remainder of the trust is split between retail and industrial property.
It is headed up by Nick Montgomery and Duncan Owen.
Investors in Global Real Estate IT
This four crown-rated trust from CBRE Clarion Securities is another that Cade flagged up for exposure to property equities.
The trust has strongly outperformed the IT Property Securities average over one, three and five years.
It has picked up 87.57 per cent over three years, while the sector gained 54.68 per cent.
Performance of trust vs sector over 3yrs
Source: FE Analytics
According to the AIC, the trust is trading on a discount of 5.8 per cent, with no gearing. It is currently yielding 3.7 per cent, according to FE Analytics.
The trust is tipped towards retail property, with holdings in Westfield Group, Camden Property Trust and CapitaMalls Asia.
The majority of the trust is allocated to North America, with 58 per cent of AUM in the region.
It holds 16 per cent in Australasia and 10 per cent in the Pacific basin. It has a low exposure to Europe and the UK, making it a good choice for an investor looking to diversify their property portfolio.
Vinaland IT
While Cade says he generally avoids highly specialised trusts, he recommends the VinaCapital Vinaland trust because the management team is committed to returning cash to shareholders over the next three years.
Cade says it is suitable for investors with a long-term view looking to take a strong valuation punt.
The trust is trading on a massive discount of 58.1 per cent, with 12 per cent gearing. Investors should keep in mind the relatively high TER of 2.39 per cent, however.
Over one, three and five years the trust has sustained heavy losses – 59.44 per cent over five years – so it is certainly not for investors who cannot afford to sit tight.
However, it has picked up 1.89 per cent over six months and 12.46 per cent over three.
Cade says that while the trust does not currently yield anything, the management team is fully focused on shareholder returns.
"In emerging market property, you have to be very, very careful what you buy," he warned.
"The thing with physical property is there are quite high costs involved so you need to make sure you’ve got the right management."
"It’s very important to know where your assets are."