Not that I’m complaining, of course. I’m very grateful to the groups who host the parties (the Heron Tower is another favourite).
But before I tumble into a pit of smugness, my point is the ascending City skyline could be seen as a showcase for commercial property investment, in London and the South East at least.
This year has seen something of muted resurgence in wealth managers’ appetite for property.
Looking at the latest IMA retail fund sales statistics, it was notable that property funds registered the seventh consecutive month of rises to £151m in August – the highest level since June 2010.
This makes sense given appetite for yield and real assets. However, unlike before 2007, inflows have not been met with jubilation, even from those involved in property funds.
A double-edged sword
“It’s a doubled-edged sword because while it is good news that people are taking an interest in property, it could all be a bit too much too quickly,” says John Cartwright, chief executive of The Association of Real Estate Funds (AREF).
“A weight of money chasing such an illiquid asset class can influence pricing, in the same way the reverse is true if investors pull out.”
It would be naive of investors to assume that funds cannot still be suspended due to illiquidity – just look at Brandeaux which this year suspended its entire fund range.
Investors must remain prudent then, though are memories of the collapse of property funds some five or six years ago holding still holding back some investors from prime opportunities?
Within the closed-ended world, bricks and mortar funds such as F&C Commercial Property, Picton Property Income, Schroder Real Estate and Standard Life Investments Property Income, have all delivered share price returns over 50% in the past five years, while the IMA sector total return is around 17% over the same period.
The yield story
The real story is yield, and while fund investors will lose some profits to fees, a 5% p.a. income is not to be ignored.
I’ll confess I get a little acrophobic in these skyscrapers, still like those invested in daily-dealing funds, I know it’s relatively easy to escape.
Still, just as it would be wrong to tar all funds with the same brush, so there’s a school of thought that not all kinds of investors actually need daily dealing – especially those who are investing for the long haul in a pension.
As far as sophisticated investors are concerned, why shouldn’t you be allowed to take on liquidity risk as you would any other risk?
“Do investors really need daily liquidity? Does it dilute returns? As a fund manager, you always have to have an eye on ensuring people can get their money back quickly,” adds Cartwright, who’s previous role was running M&G property funds.
“This means you have to hold ‘clean’ properties, which are at the top-end of the price range. You also have to hold cash, and shares in REITs, which can be a drag on returns.”
The conversion of funds to PAIFs is one thing the funds industry is doing to help investors, but with the renewed interest in property should be a rethink of how funds are marketed, sold and held in client portfolios.
