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Standard selects property

Standard Life Investments

Select Property Fund

Type: Authorised property unit trust

Aim: Income and growth by investing directly and indirectly in a global property portfolio

Minimum investment: Lump sum 5,000

Investment split:50% UK, 15% Europe, 5% North America, 5% Asia, 20% UK bonds, 5% UK cash

Isa link: Yes from April 2006

Pep transfers: Yes from April 2006

Charges:Initial 5%, annual 1.75%

Commission: Initial 3%, renewal 0.5%

Tel: 0800 333353

Standard Lifes select property fund is an authorised unit trust which invests directly and indirectly in property on a global basis.

Looking at this funds suitability to the market Hargreaves Lansdown senior analyst Meera Patel points out that one of the useful features of a property fund is that it can act as a diversifier in an overall portfolio.

This fund goes a step further and offers both direct and indirect property investments and also global diversification without being restricted to the property cycles of a particular market or region. This is also one of few funds to invest in global Reits, offering further diversification, she says.
In Patels view, the fact that up to 25 per cent of the portfolio can also invest in bonds and cash is an appealing feature and provides a form of liquidity. In particular, this feature would be useful during periods when the global property market is suffering, she says.

Another appealing aspect about the fund that Patel draws out is that it aims to offer a growing and consistent level of income. The fund aims to deliver a minimum net yield of 4.5 per cent with potential for capital growth on top, says Patel.

On the downside Patel feels the funds annual charge is a little on the pricier side at 1.75 per cent. This would certainly eat away at some of the return. Most property funds charge between 1.25-1.50 per cent, she says.. While this product offers diversification and can be suitable for many portfolios, Patel exercises a note of caution on the property market.

The commercial property market, particularly in the UK, has been booming for a number of years. Rental yields have already been falling and coupled with an economic slowdown we expect to see lower total returns from the UK commercial property market going forward. We believe investors should have no more than 10% of their portfolio in UK commercial property in the current environment, she says.

One of the other worries Patel has about the sector is that it has attracted a lot of interest over the last couple of years and many funds are sat on large piles of cash. We would therefore question exactly how hard investors money is actually working from them in these funds, she says.

Patel identifies several quirkier property funds launching at the moment with less focus on the UK market as possible competitors. For example, Swip has recently launched a European Real Estate Fund. There is also the Sarasin Global Property Fund which invests in equities and REITS. There are also traditional property funds such as the Norwich Property and New Star Property Funds which are mainly UK based. Whilst none of these provide a direct comparison with Standard Lifes fund, these companies would be regarded as the main competition in this sector.

Patel concludes: Whilst one of the advantages of the Standard Life Select Property Fund is its global diversification, on the downside the fund is also expected to have at least 50 per cent exposure to the UK property market at launch which we believe is at risk from a slowdown.

BROKER RATINGS

Suitability to market: Good
Investment strategy: Good
Charges: Poor
Adviser remuneration: Average

Overall 7/10:


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