In anticipation of increased medium-term volatility, some investors have been recently paring back their exposure to equities and bonds and holding those reductions in cash, ready for redeployment depending which way the market swings.
However, with the UK economic cycle still on an upward tick, Hambi, head of fund of funds at Standard Life Investments, says property offers a prime opportunity.
“The economic recovery started off London-driven, then spread to the South East, and now the major cities are seeing some opportunities” he said.
“However, it is very much the major cities, such as Manchester, Leeds and Birmingham, Edinburgh, Glasgow and Bristol. Property is all about location, and the opportunities are around these main cities.”
Riding the cycle
One of Hambi’s plays in the sector is a 6.37% slice of his MyFolio Multi-Manager Income III Fund in Henderson UK Property OEIC, which invests in offices, retail and industrial units across the UK.
While Onuekwusi, manager of the L&G Multi Index range, has upped his cash weighting during the past month, the forward-looking picture combined with past performance means that UK commercial property remains among his favourite asset classes.
“UK property is a stand-out asset class from a risk/return perspective and can give you protection if equities and bonds fall, as they have during the past quarter,” he expanded. “It has been our best-performer over the last quarter, driven mainly by increasing rents in primary and secondary properties, and also an increase in transactions both inside and outside of London.
“At the end of 2012 almost 70% of total UK property transactions were in London, but the increase in capital values since 2013 has seen that come down to 40% today.”
Hambi’s conviction is evident in his portfolio, with UK property accounting for 9% of his medium-risk portfolio, while Onuekwusi’s Multi Index 3 and 5 carry weightings of 9% and 7.5% respectively.
Both managers see UK commercial property as having pockets of eye-catching yield, and with rents moving up they are expecting healthy return prospects over the next few years.