ealth managers may still debate the merits of open- versus closed-ended property funds, but when it comes to the hard reality of where they put their cash, the choice is unambiguous.
Using public data, Citywire Wealth Manager identified 14 property strategies held by two or more model portfolios or fund-of-fund portfolios in the UK. Of those, only three were open-ended bricks-and-mortar mandates. One of those three, the Aegon Property Income fund, is currently in the process of being liquidated.
Half of the funds to make the list were closed-ended, while the remainder were open-ended funds that hold liquid real estate securities.
As a further clue to how wealth and multi-managers invest in property, all but one of the investment trusts, the Secure Income Reit, were highly specialised either by industry or location.
The specialists
The most widely held fund (see table below) is the Primary Health Properties trust, owned by the multi-manager teams at Jupiter, Premier Miton, Liontrust and Marlborough. The strategy, managed by Nexus, holds about 500 properties, which are let to primary care operators such as GPs and pharmacists.
Richard Curling, manager of the Jupiter Monthly Alternative Income fund, stressed the company’s performance, track record and the quality of its assets – long leases on properties with rents paid by the government – as key reasons why he likes the fund.
He said: ‘They have effectively upward-only rent reviews, which are in effect index-linked, and I think that is particularly attractive at the moment.
‘This is not a company that has just started up – I have known this company for a long time, and I’ve invested in it for all of 25 years. A company that has that kind of track record really puts it into the quality camp.’
That view was shared by Mayank Markanday, senior investment manager on the Liontrust MA Diversified Real Assets fund, who highlighted how the fund benefits from ‘stable NHS tenants’.
On the downside, Citywire + rated Curling highlights the fund’s substantial premium to net asset value at 39%. Its yield of around 3.5% is also lower in comparison to a lot of Reits, he added.
By contrast, one of the main attractions of the Supermarket Income Reit is the income it provides in a world where this is increasingly hard to find, at a current yield of 4.8%. Run by alternative asset manager Atrato Capital, it owns the leases for about 60 supermarkets.
The fund, also held by Jupiter alongside Aberdeen Standard and several smaller fund groups, trades at a 12% premium. Curling said that an average lease term of 16 years suggests the company will offer ‘pretty decent, secure, visible income’ over that period.
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