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Cautious return to commercial sector

Multi-managers T Bailey and Midas Capital are reintroducing UK commercial property back in to their portfolios but both remain cautious in their outlook for the sector.

T Bailey has made a small move into UK commercial property within its cautious managed fund through a bricks and mortar fund, the Swip property trust, and the iShares FTSE Epra/Nareit UK property exchange traded fund.

Midas Capital’s CF Midas balanced income fund also holds the Swip property trust and has just added the Ignis property fund to the portfolio, bringing its total weighting in UK commercial property to just over 2.5 per cent.

T Bailey says its property fund holdings represent its house view of becoming less negative, rather than explicitly positive, on the sector. It believes there is still some value in property shares but expects most of the value will be in bricks and mortar property funds. It expects to trim its exposure to property shares and bolster its bricks and mortar exposure in due course.

T Bailey chief executive officer and fund manager Jason Britton says: “The feedback we are receiving from many of the property fund managers is the property sector has just about bottomed out, although availability of finance remains a problem. Yields have risen in general over recent months but while there are pockets of opportunity – for example, one fund manager that we have recently seen is very keen on shopping centres – the next couple of years will remain challenging.”

Midas Capital Group investment director Alan Borrows believes having no property exposure would be a very extreme position. He says:

Yields are more attractive but we are not getting too carried away. We are not looking to a full-scale allocation to property as there are still headwinds to overcome but we think the yields are enough to justify a little bit of exposure.”

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