Not surprisingly, property was an unpopular asset class in November’s rebalancing, with only 1 per cent allocated to Aggressive portfolios and 4 per cent each in Balanced and Cautious. In each case, exposure was reduced or stayed the same as the previous season’s allocation.
Nationwide and Halifax have reported falling house prices throughout 2008 and the Investment Property Databank All Property index was down by 23.18 per cent from January 31, 2008 until January 30, 2009, according to Financial Express.
Only five funds focused on real estate were chosen for the AFI portfolios and only two of these have a British bias.
New Star international property was the most popular. It was chosen by four panellists for Balanced and Cautious portfolios and one for Aggressive.
It reports a loss of 25.23 per cent compared with the property sector average fall of 35.5 per cent over the past year.
At launch in June 2007, this fund saw inflows of £202m, the biggest retail launch in history. However, in early December 2008, New Star suspended trading after some large institutional clients redeemed their positions. The group says it was necessary to restore sufficient liquidity to the fund.
Sibley says it is unlikely that the portfolios will be moving out of the fund once trading has resumed as the position was not an overweight and the case remains for dividends and yield.
“We think that the case still remains for this fund and although the Henderson takeover of New Star is something to consider, we like to have the full facts before making a decision.”
Rob Harley, a fund analyst at Bestinvest, is not as impressed with the fund and says it will definitely be removed from the AFI portfolios in the next rebalancing, that is, if New Star allows it.
The other property funds chosen with a focus outside of Britain are First State Asian property securities and Standard Life Investments select property fund. Both have exposure to the listed property markets, an area that Bestinvest’s Harley anticipates will recover quicker than bricks and mortar funds.
“Property has further downward to go, especially in bricks and mortar, an area I would not be investing in right now. The valuations tend to lag the market and are still playing catch-up with what the listed property companies are pricing in.”
M&G property portfolio and Swip property were the other funds included in the AFI portfolios.
Both are bricks and mortar funds focused on British assets and while Sibley says these are worth holding for diversification benefits over the long term, Harley is going to continue to steer clear.