Thu, 22/05/2014 - 12:04
Property is set to remain buoyant on a relative basis for at least the next three years, according to fund manager Tony Yousefian, who moved to investment boutique Charteris Treasury Portfolio Managers in March.
Yousefian has managed his Morningstar 3 star-rated EFA OPM Property Fund since launch (21 May 2007), delivering a return of 3.23 per cent in the first quarter against a rise in the IMA Property Sector Average of 1.8 per cent.
The GBP9.6m fund is firmly in the first quartile over the period. The fund’s year to date return of 4.58 per cent also continues to be ahead of the sector average of 3.21 per cent.
Property has become an increasingly popular choice amongst asset allocators over the course of the last year, powered by strong growth in capital values and rental income, but it is the attractive yield and the diversification the asset class offers which Yousefian believes will be the catalyst for asset allocators to further increase their weighting to Property in the months ahead.
Speaking at the Charteris Investment Seminar, held at the Savile Club in London’s Mayfair district last week, Yousefian said: “We expect commercial property to post a return on capital in the region of 10 to 15 per cent this year, but for those seeking income and who are prepared to diversify away from equities and bonds, it is the strong growth in rent values and its’ low correlation to equities which makes Property such an attractive alternative at this time, and which is leading growing numbers of portfolio managers and asset allocators to show a greater conviction to the asset class.”
Property is usually the last asset class to react exiting a recession, but Yousefian has been bullish of the asset class since 2013, and feels property has much further to go - believing property should play a part in every investor’s portfolio and that intermediaries could be increasing the asset class weighting in typical balanced portfolios to as much as 20 per cent.
The multi-asset EFA OPM Property Fund - which invests in bricks and mortar funds, REITs, REITs collectives and property investment companies - offers a dividend yield of 2.8 per cent, and whilst there has been a low volume of trading in the fund of late, it has benefited from scaling back exposure to global REITs over the past 12 to 18 months in favour of an overweight to European REITs, which are benefiting from low interest rates.
Yousefian has been gradually taking profits on his UK holdings and has reduced the fund's exposure to alternative assets from circa 7.6 per cent to around 6.0 per cent, selling out Duet Real Estate Finance (a stock exchange listed loans company), reinvesting the cash along with the proceeds of the sale of the TR Property Investment Trust to take a new position in the F&C Real Estate Securities Fund.
The manager - who looks to deliver a return superior to traditional bricks and mortar funds with lower volatility than REITs - sees good prospects for both components, the EFA OPM Property Fund weighted geographically to the UK (58.18 per cent) and Europe (8.53 per cent) as follows:
• REITS direct: 35.11 per cent
• Collectives - bricks and mortar: 27.58 per cent
• Collectives – REITs: 24.51 per cent
• Alternative assets: 7.6 per cent
• Fixed interest: 3.39 per cent
• Cash: 1.8 per cent
EFA OPM Property Fund top 10 holdings
• Premier ICVC: 14.16 per cent
• M&G Property Portfolio: 7.84 per cent
• Ignis UK Property: 7.78 per cent
• Henderson UK Property: 6.55 per cent
• Legal & General UK Property Trust: 6.19 per cent
• Japan Residential Investment Company: 5.62 per cent
• M&G Global Real Estate Securities: 4.07 per cent
• PFS Twenty Four Dynamic Bond: 3.6 per cent
• SAFESTORE: 3.14 per cent
• Hammerson plc: 3.01 per cent
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