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Managers clash on commercial property outlook

Multi-asset managers are at odds over how attractive UK commercial property is, with critics arguing the illiquid nature of the asset class is still holding it back.

Apollo multi-asset manager Ryan Hughes has added commercial property exposure to his Cautious and Balanced funds, using a 5 per cent position in Fiona Rowley’s £2.3bn M&G Property Portfolio fund to make the funds’ first allocation to commercial property since 2011.

Hughes says: “With the recovery in the UK economy becoming more deep rooted, we are seeing strong signs that UK commercial property is once again becoming an attractive asset class. 

“Property has great diversifying characteristics and we are confident it will prove a very useful holding in our funds, particularly given the lack of value in other traditional stable asset classes such as fixed interest.”

But Psigma Investment Management chief investment officer Tom Becket has recently taken a “negative” view of UK commercial property.

He says: “I am vehemently against the illiquidity of bricks and mortar funds and their swingeing fees. Memories of 2007 and the ‘gated’ funds loom large in my memory and I have seen little to suggest that the inherently illiquid nature of UK property funds have ameliorated.”

Becket adds other reasons for remaining sceptical on the asset class are the slack remaining in the UK economy, the lack of obvious inflation pressures over the medium term, better yield in other areas of the market and the relatively high fees of property funds.

FE Analytics shows the average fund in the Investment Management Association Property sector has returned around 4.5 per cent over 2013 so far, compared with a 12.5 per cent gain across the whole of 2012.

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