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Adviser Fund Index: Building Brics and property

Investor appetite for property funds continues unabated, according to the Investment Management Association’s sales figures for October.

The specialist sector was once again the most popular, with over £500m in net retail sales. Of this, £380m flowed into property portfolios and the increasing importance of the asset class is reflected in the Balanced Adviser Fund Index.

The AFI panellists increased their exposure to property by 1.2 percentage points to 7.6 per cent during the rebalancing on November 1.

Two propety funds joined the index as a result – Fidelity global property and Skandia global property securities.

The Fidelity fund has only been available as an Oeic since September following the launch of an equivalent Sicav earlier in the year.

The fund is run by Steve Buller and holds between 50 and 70 liquid property securities, mainly real estate investment trusts. Buller has run the real estate research team for Fidelity Management Research – Fidelity International’s American affiliate – since 1998.

The £230m Skandia portfolio, launched in October last year, is run by LaSalle Investment Management, a division of Jones Lang LaSalle. The fund, which uses hedging to reduce currency risk, held just over half of its assets in the US on October 31, followed by allocations of almost 13 per cent to Europe and Britain.

In sector terms, the fund favoured offices, retail and diversified investments.

Fund turnover in the Balanced AFI was high during the rebalancing. The panellists ejected 17 funds and brought in 26 new holdings, increasing the total number to 112.

In addition to property, the allocations to structured products, fixed interest, cash, North American equities and international equities all increased. The biggest fall was in UK equities, down by over 4 percentage points. The weightings in European and Asia Pacific equities also fell by smaller margins.

Despite the bearish nature of the allocation changes, some more adventurous funds were added to the index. For example, Allianz Global Investors’ Bric Stars fund was selected by one panellist. The fund, which has taken more than £30m since its launch in February, invests mainly in the equity markets of Brazil, Russia, India and China. Standard & Poor’s recently awarded the fund an A rating.

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