F&C head of fund of funds Dean Cheeseman is planning to buy into two commercial property funds before the end of the year.
A number of Cheeseman’s mandates, such as the lifestyle funds have an automatic allocation to property but have proactively held property index certificates which track the Investment Property Databank.
He has recently started to sell some of these derivatives with a view to buying open-ended property vehicles.
He says: “We think the swap market and hence the Pics have priced in most of the property recovery and are way ahead of the open-ended structures.
“We will start buying open-ended property vehicles which we believe will benefit from the revaluation in the properties that the Pics have already priced in, in other words, we get a second bite of the same cherry.”
Cheeseman is now assessing the quality of the property books of nine bricks and mortar funds and undertaking research into their underlying tenants.
He says: “We have started tiptoeing around the first purchase. We think we are going to make three purchases into more core property funds and a slightly more specialist vehicle which, if it works, could give a bit more diversification. I would like to think we will go into at least two before the end of the year.
Alan Steel Asset Management consultant Alan Adam says: “There has been a lot of money moving to commercial property. It may be a bit premature as there are some big rent reviews due in 2010 but as long as you are taking a four or five year viewpoint now is not a bad time to be looking at it for diversification.”
Cheeseman also believes the recent swathe of Ucits III absolute return launches are “too little too late”. He says: “We have had a massive financial crisis and you needed these instruments ahead of that. I see these falling out of favour as quickly as they fell into favour because long-only returns are likely to surprise on the upside.”