Indeed, while investors stuck seething in suspended funds could be considering throwing the kitchen sink out with the rest of their property allocations, for many asset allocators, property remains a good and very profitable diversifier – assuming one knows where to look.
Richard Stammers, investment strategist at European Wealth told Portfolio Adviser it has been worried about commercial property for some time now and as far back as July 2015 began a programme of phased withdrawals from its commercial property positions.
“This exercise has been illuminating,” it wrote at the time, “Despite protestations of there being plenty of liquidity, moving out of the positions has not been as straightforward as we had expected. This has reinforced our concerns about these funds and we expect to have completed our withdrawal in the near future.”
Despite this, Stammers said, the firm still has an exposure to property through the Schroder Global Real Estate Securities fund, which, while more volatile than bricks and mortar funds, has the benefit of more liquidity from an underlying investment point of view and, given its strong weighting to the US has also benefitted handsomely from a currency tailwind given sterling’s recent decline.
Iboss senior investment analyst, Chris Rush said his firm too has been slowly reducing its property allocations on the back of, among other things, increased valuations.
But, while the firm will have its lowest every property weighting by August, that weighting is still 6%.
And Rush said: “While it would be easy to entirely sell out of property on the back of deteriorating news it isimportant to note that property has significant benefits to the portfolio from a diversification standpoint and not all property funds are created equally.”
By way of example, Rush said, while many of the bigger names have seen a significant level of price change in recent months, the more global securitised property funds such has First State’s global property securities fund has performed well.
“Equally, HSBC Open Global property, a fund of funds run by Guy Morrell has outperformed the sector handily over the same period. This is in no small part due to his decision to reduce his Bricks & Mortar weighting to the lowest in the funds history,” he said.