New Star looks to have another winner with its excellent property unit trust. The fund is run by two top managers, Andrew Hicks of Capital Counties, who is responsible for direct investments in commercial property, and Robin White of Liberty International Asset Management, who manages the property share portfolio.
The fund has attracted large amounts of mainly institutional investment and has now reached £180m. Commercial property has been a fairly dull investment over the last few years but this fund has managed to give a return of 60 per cent since launch in June 1999 and yields around 4.5 per cent.
While residential property has increased hugely in value and looks to be near a peak, commercial property investments have grown steadily and over the longer term have shown returns of around 8 per cent a year. The income usually increases each year in excess of inflation. Leases on commercial property are much longer than for residential property, sometimes up to 25 years, with upwards-only rent reviews linked to inflation.
New Star only invests in commercial property with good quality tenants and the tenants have liability for repairs.
In today's uncertain world, where equity markets are volatile, this conservatively managed investment is ideal for elderly and conservative investors who require an above-average income.
For those who are prepared to take a five-year view or longer, the New Star property unit trust should outperform building society deposits by a substantial margin and at the same time achieve an equally high immediate and rising income.
This trust should be part of every conservative and realistic investor's portfolio.