According to a recent FE Trustnet survey, 39 per cent of FE Trustnet readers have no exposure whatsoever to property – while the majority who do are invested in property equities.
Only 28 per cent of respondents hold property or bricks and mortar funds.
According to FE Trustnet research, investors who kept some exposure to property would have been better off putting their money in "higher risk" equity portfolios than sticking with physical bricks and mortar funds.
Of the top-10 funds in the IMA Property sector over five years, not one invests in physical assets – meaning equity-based funds have outperformed in terms of total returns over the period.
However, the top-performing equity-based property funds have largely been more volatile than both the sector and its standout bricks and mortar funds.
Top-10 IMA Property funds over 5yrs
Source: FE Analytics
Over five years, each one of the best-performing property funds has been more volatile than the IMA Property sector, which has an annualised score of 12.88 per cent over the period.
Funds that invest in physical assets have been significantly more stable – their volatility scores over the same period range from as little as 1.86 per cent to 7.65 per cent, according to FE Analytics.
The best performer over the period is the four crown-rated First State Global Property Securities fund, which invests in shares of companies around the world. It is also one of the most volatile, however, with an annualised score of 22.61 per cent.
Over five years, the £168m fund has made 50.12 per cent, outperforming the sector by 48.3 percentage points.
Performance of fund vs sector over 5yrs
Source: FE Analytics
The fund was taken over by First State’s head of property securities, Stephen Hayes, in November last year.
It is currently yielding 2.25 per cent and requires a minimum investment of £1,000.
It has a total expense ratio (TER) of 1.64 per cent. The HSBC Open Global Property fund, headed up by FE Alpha Manager Guy Morrell (pictured), is the least volatile of the top-performing equity portfolios, with a score of 13.14 per cent.
This is largely down to its mix of shares and physical assets.
Over five years, the £40.4m fund has made 27.84 per cent, making it a second-quartile performer.
The fund only lost money in the falling markets of 2008 and 2008, dropping 19.53 per cent in 2008 when the sector as a whole lost 30.12 per cent.
Discrete calendar-year performance of fund since 2008
| Name | 2013 returns (%) | 2012 returns (%) | 2011 returns (%) | 2010 returns (%) | 2009 returns (%) | 2008 returns (%) |
|---|---|---|---|---|---|---|
| HSBC Open Global Property | 6.36 | 11.33 | -5.53 | 15.82 | 20.75 | -19.53 |
| IMA Property | 3.81 | 12.54 | -6.04 | 13.41 | 14.44 | -30.12 |
Source: FE Analytics
The fund holds 61 per cent of its assets in property shares and 37 per cent in physical property.
It requires a minimum investment of £1,000 and has a comparatively high TER of 2.2 per cent, according to FE Analytics.
While equity portfolios have surged ahead over the last few years, the bricks and mortar funds tend to have a higher yield than their equity counterparts. The Aviva Property Investment fund, which sits in the sector, has the highest yield – at 5.2 per cent.
Although the fund is offering an attractive level of income in today’s low-yielding environment, it has shed 22.95 per cent over five years – and it has yet to recover its losses.
The next highest-yielding funds are Threadneedle UK Property and the five crown-rated Henderson UK Property – both at 4.5 per cent.