View more on these topics

Property Special Report: Making comparisons

FUNDS Gregor Watt considers the difficulties of assessing comparative property fund performance.

One of the problems which crops up when trying to look at the performance of property funds is the difficulty of comparing one fund with another.

With an equity fund, whether it is a tracker, a growth or income fund, you know roughly what the fund is going to be invested in and there is a clear benchmark to compare the fund’s performance with.

But when it comes to property, it is not that simple. Not only are there different fund structures to contend with, such as property unit trusts, exempt property unit trusts, limited partnerships and offshore investments, such as the Jersey property unit trusts, but there is also a wide variety of investment styles.

Under the overall umbrella of property, funds can be invested heavily in widely differing sectors, such as out of town shopping centres, West End London office space or a balanced range of property sectors.

Funds can also be either bricks and mortar funds invested in physical investments or securities funds (invested in shares in quoted property companies) or some mix of the two.

Comparing like with like can sometimes be an issue.

BestInvest head of communications Justin Modray says if you have the correct benchmark to compare the fund with understanding the fund becomes much easier.

“Where IFAs can sometimes have difficulty is comparing one fund with another,” he says.

The fact there is no one index for property funds makes comparing different funds an even more tricky proposition.

The HSBC/Association of Real Estate Funds/IPD property index lists a number of property funds, but they are both retail and institutional funds and the IMA specialist sector also lists a number of funds but has a number specialist equity funds also included in its universe. Neither index take account of different investment styles. For example in the IMA specialist sector the New Star Property fund, which invests predominately in physical UK commercial property, sits along side the Skandia Global Property Securities fund.

What is not in doubt is the strong investment returns that all forms of property have produced in the last few years. Over the last year, the average return from property funds in the IMA specialist sector is 17.36 per cent, with the top performers returning figures much higher than that. The Standard Life Select property fund, the Swip Euro real estate fund and the Premier PanEur property fund posted figures of 26.25 per cent, 25.6 per cent and 23.91 per cent respectively, which compares very favourably with returns from the FTSE 100, which returned 9.32 per cent over the same period.

However, for many investors, rather than try to compare funds, it is a matter of finding a fund manager whose judgement is trusted.

Modray says: “For a lot of investors, you put your faith in a particular fund manager rather than trying to compare different structures.”


PFS asks members for views on wrap

The Personal Finance Society is to consult members on their use of wrap in the form of a short questionnaire with the results to be used in the PFS’s discussions with the FSA over wraps and platforms.

Chris Phillips dies after mountain trek

Chris Phillips, the former head of Scottish Widows’ Investment Partnership has died after becoming trapped on a mountain in freezing conditions while walking the route of a historic Spanish pilgrimage.Phillips, aged 50, had been walking the pilgrims’ route to Santiago de Compostela. He died from hypothermia last week after heavy snow and strong winds forced […]

5% Slump in young people taking out life insurance

The number of young people buying life cover has fallen by 5 per cent in the past year, according to Lifesearch.The protection company released its new business figures,which showed that people aged 35 years and under buying some form of life cover had fallen by 5 per cent to 31 per cent in the 12 […]

India correction: a terrific entry point?

By Kunal Desai, head of Indian Equities, Neptune A key concern for investors who were looking at India afresh has been the rich valuations and strong prior performance. We view the correction in the market through short-term growth concerns from demonetisation as a terrific entry point for the long-term investor. Investors should not be overly concerned […]


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm