BEST UK FUND
L&G UK Property
1-year return: 8.6% | 3-year return: 20.3%
L&G UK Property has picked up the Best Direct Property fund in our awards in four out of the past six years – 2012, 2013, 2015 and 2017. In 2018 it takes the renamed UK property gong. It has also made it on to our Rated Funds list in four of the past six years.
One of the biggest funds in the sector, with more than £3.1 billion under management, it invests in physical property and focuses on high-quality properties with the aim of enhancing value by engaging with tenants and building managers.
Fund managers Michael Barrie and Matt Jarvis take a cautious approach to property investing and had 20 per cent of the fund’s assets in cash and liquid assets at the end of March 2018. This high cash weighting led to a period of underperformance when the property market bounced back from the slump that followed the EU referendum in June 2016. The fund sank to the bottom of the performance tables, but it was also one of the few open-ended property funds that stayed open in the aftermath of the EU referendum when fears that the property market would crash saw many property funds suspend trading to avoid being forced into a fire-sale of their assets.
This fund’s setback in performance was a mere blip; it has beaten its Morningstar category average by 15.7 per cent over the past year, putting it firmly back in the first quartile. Unlike many other property funds it is welldiversified across the regions, with its strongest weighting to the South East, which accounts for one-fifth of the portfolio, followed by 17.9 per cent in the West Midlands and 10.6 per cent in central London. The fund is yielding 2.1 per cent at present.
BEST GLOBAL FUND
Standard Life Investments Global Real Estate
1-year return: 1% | 3-year return: 17.9%
Although not topping the performance tables, this fund scoops our Best Global Property fund title in 2018 thanks to its steady and consistent performance. It has outperformed its Morningstar category by 8.1 per cent over the past year and by 4.1 per cent over three years, putting it in the second quartile of its peer group.
The objective of the fund is to provide an income with some capital appreciation over the longer term. The fund is yielding a respectable 3.6 per cent at present. The portfolio has just 42 holdings, but these are well-diversified in terms of geographical spread. The fund’s assets of £398 million are invested across the globe – from the US to India and Australia – and in a mix of both direct commercial real estate and real estate-related equities.
The fund had 16.2 per cent invested in property shares at the end of March 2018, with the balance in physical property. Indirect investments include real estate investment trust shares and other quoted and unquoted property companies, with the fund’s largest listed real estate holdings being Prologis and Hilton Worldwide Holdings.
Manager James Britton started his career as a surveyor, but has notched up 12 years’ experience with Standard Life Investments’ real estate team, having joined as a portfolio manager in 2006. He says the fund is positioned towards sectors and jurisdictions that he expects to deliver medium- to long-term elevated performance. He currently holds direct assets in the Dublin and Melbourne office sectors and recently acquired a Dutch logistics investment. On the listed side, the fund has overweight positions to US logistics and Spain and is generally underweight to the retail sector.