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Iimia seeks opportunities in property sector as sentiment takes a dive

Iimia is taking advantage of the wide discounts on many property investment trusts as it says the downturn in investor sentiment has created buying opportunities.

It says several Guernsey-listed trusts that launched with fully invested portfolios and high yields were trading at a 10 per cent premium last year but discounts have started to appear as sentiment towards commercial property has slipped.

Fund manager Daniel Lockyer says the attractiveness of UK commercial property has diminished because interest rate rises have made it possible for investors to get higher yields from deposits.

But he points out that the cost of borrowing in Europe has not exceeded property yields, so the vehicles are still attractive.

Iimia is favouring Germany, Japan and some emerging markets because property prices are relatively low and the relationship between the cost of borrowing and rental yields is more favourable than in the UK.

Iimia prefers to access property through closed-ended rather than open-ended funds. It says open-ended funds attract inflows of new money, which means managers either have to sit on cash or buy something whether it is attractive or not, just because they have to invest the money.

Lockyer says: “Closed-ended funds have ready-made property portfolios and the yields are higher. Unlike open-ended funds, they do not have to spend money on transaction costs and you can buy at a discount to the underlying portfolio. If market sentiment improves and share prices rise, you should make more money.”


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