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Building blocks

The performance of the UK commercial property sector is likely to be less than in the past few years but returns still look likely to be between 6 and 9 per cent in 2007. Well managed international property in selected areas should prove a much better bet.

John Duffield, who usually gets things right, has invested millions of pounds of his own family money into overseas property. His New Star has launched an international property fund which has already proved to be a huge success. As well as investing in continental Europe, it will also invest in a variety of locations in the Asia Pacific region depending on where the best opportunities lie.

The fund will invest in high quality buildings located in major cities, let to strong tenants on good leases, particularly in locations where property has the potential for rental income growth which has not yet been fully reflected in market prices.

Germany is a major area where the commercial market has lagged in recent years and is now picking up. The same argument applies to good class property in the Netherlands. The Japanese market is now rising and looks likely to perform well.

Australia is another attractive market, particularly in Melbourne and Sydney. One of the main advantages of the new fund is its comparatively high yield estimated at 4 per cent. Eighty per cent of the fund will be invested directly into international commercial property, 10 to 15 per cent in property shares and around 5 per cent in cash.

The fund is managed by Roger Dosset and is backed up by a strong international team. This is certainly a fund for all growth and income portfolios and is especially useful as an investment for trustees and for the elderly. This is an asset class which can be strongly recommended at the present time.

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