Strutt & Parker Real Estate Financial Services has designed a commercial property fund for retail investors with small amounts.
The Sprefs UK commercial Property fund invests in commercial property through an the Deutsche UK managed property fund. The Deutsche fund is an institutional fund with a minimum investment of £250,000 so retail investors would otherwise not be able to invest in it. However, via the Sprefs fund, they can invest from as little as £15,000 or £3,000 through an Isa.
The Deutsche UK managed property fund in turn invests in three sector-based Deutsche property funds - Deutsche UK industrial property, Deutsche UK office property and Deutsche retail property.
The underlying Deutsche funds are actively managed using research produced from around the Deutsche group and property researchers Property Market Analysis. From this data, investment strategies are developed and these are regularly reviewed.
When selecting properties for the underlying portfolios, the 10-strong team at Deutsche Property Management will look at rents and yields, rental growth, location and the creditworthiness of tenants. Day to day management of the properties, such as maintenance, is outsourced to specialist property managers.
Property is often mentioned as an important element of a balanced portfolio because of its lack of correlation to bond and equity markets. However, property funds can be expensive and are usually aimed at institutional or high-net-worth clients with investment experience.
The Sprefs fund differs from other property funds in that it provides retail investors with access to an existing property portfolio with charges that are comparable to equity funds. Investors with smaller amounts would not have enough cash to invest directly in properties and even if they did, this would also carry higher risks.
The feeder approach operated by Sprefs also allows indirect exposure to property so the risks are reduced. However, some Isa investors may find the feeder fund approach, with its three layers of investment, difficult to understand so it may still not meet the property investment needs of the mass market.