According to the latest IMA statistics, open-ended property funds achieved sales of £491m in May which was the highest since the £519m realised in December 2009.
Investors’ insatiable appetite for income explains much of the appeal of property, though Toby Ricketts, chief executive at Margetts Fund Management, believes the trend is merely “a symptom of overvalued bond markets.”
“Property is an illiquid investment, though property funds purport to be liquid and from time-to-time there will be liquidity issues – whenever hot money flows in and tries to get out again,” he said.
“The risks in property are currently greater than ever before because a lot of advisers are now running model portfolios, and using property funds. Back when things were more bespoke the ins and outs of property funds were more random, but today when a few IFAs decide to leave property and take their money off the table, then that’s going to trigger a move to bid, which will in turn encourage others to sell and you are much more likely to see a lot of money that’s moved into property move out at the same time.”
Still, a widespread move from funds to the tax-efficient PAIF status has coincided with some of the most bullish comments from fund managers in years. For example, Aviva Investors recently increased its annual UK commercial property performance forecast from 6.5% to 8.9% for 2014-18.
Still, equity remained the highest selling asset class in May, according to the IMA figures, with net retail sales of £558m.
The UK Equity Income sector was the second bestselling sector with net retail sales in the month of £270m, while Global funds also proved popular achieving £248m.
“After the rush of the ISA season in March and April, net retail sales held up well at £1.9bn in May, with investors spreading their investments across all the main asset classes,” said IMA chief executive Daniel Godfrey.
“Equities continued to lead the way with UK Equity Income and Global in the top five top-selling IMA sectors. But Property also received a big slice of investors’ funds and topped the IMA sector table for the first time since January 2010.”
An in-depth look into commercial property funds features in the July edition of Portfolio Adviser, out now.
