And the winner of the UK Property award is...
1-year return: 4.9%
3-year return: 16.6%
L&G UK Property has picked up the Best UK Direct Property fund in our awards in six out of the past eight years – all bar 2014 and 2016. One of the biggest funds in the sector, with more than £3.26 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 have more than one quarter of the fund’s assets in cash and liquid assets, up 5% from a year ago. 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 was also one of the few open-ended property funds that stayed open in the aftermath of the vote, when fears that the property market would crash saw many property funds suspend trading to avoid being forced into a fire-sale of assets.
The fund ranks in the second quartile of its peer group over three years, but remains one of the most consistent in the sector. Its income credentials are also not to be sniffed at – the fund yields a respectable 2.4% from a portfolio of 95 physical properties.
Unlike many other property funds it is well-diversified across the regions, with its strongest weighting to the South East, at one-fifth of the portfolio, followed by the West Midlands, London suburbs and central London.
More than one-third of the portfolio is in industrial property. The managers expect future positive returns from direct property to rely on continued strength of the industrial market. Political uncertainty is likely to result in some volatility too.
Regional diversification bears fruit for cautious fund