Increased inflows to property investment trusts have contributed to what appears to be a bumper year for advisers buying the closed-ended funds, data from the Association of Investment Companies and Matrix Financial Clarity shows.
Although data for the full year is not yet available, investment trust sales for the first three quarters totalled £745m, already surpassing the entire total for both 2015 and 2016, which were £698m and £671m respectively.
In Q3, the most recent quarter for which there is data, the Property Direct – UK and Property Specialist sectors featured among the most popular sectors, attracting 10 per cent and 8 per cent of inflows respectively.
AIC chief executive Ian Sayers says the popularity of property investment companies follows the problems experienced by open-ended funds following the Brexit vote. Many open-ended funds gated during the weeks immediately following the referendum due to liquidity concerns.
Last July, the FCA said fund groups did not have a clear plan to value property portfolios in the wake of the Brexit vote following a review of reviewed 60 firms including fund managers, platforms, wealth managers and advisers.
Sayers says Q3 is the first time property sectors made up two of the four most popular sectors for advisers and wealth managers.
In Q1 and Q2 2017, Property Direct – UK was the second most popular sector with 13 per cent of purchases each time. In Q2 2017, the Property Specialist sector was the sixth most popular with 5 per cent of purchases.
Three new companies launched in the Property Specialist sector in Q3 – Residential Secure Income Reit, Triple Point Social Housing Reit and Warehouse Reit – and Empiric Student Property and GCP Student Living completed fundraisings.
While total Q3 inflows into investment companies were up 35 per cent on the previous year, totalling £235m, the quarter was down on Q1 (£252m) and Q2 (£257m). However, this reflected trends across all investment types.
The main adviser platforms for investment company purchases during Q3 were Transact with 41 per cent of the market, followed by Alliance Trust Savings and Ascentric with 18 per cent each. FundsNetwork took a 6 per cent share, Raymond James 5 per cent and 7IM 4 per cent.
Sayers says: “Advisers are clearly recognising the benefits of investment companies including their strong long-term performance, income advantages and suitability for illiquid assets.”