Global property equity funds have risen 12.6 per cent in a sharp rebound over the first half of 2012, but analysts warn that the outlook for the sector is still uncertain.
S&P Capital IQ Fund research has revealed the sudden climb, which follows a 7.8 per cent decline in 2011 and an even steeper fall of 10.5 per cent in 2010. The pace of US recovery across all sectors and growth in China are being labelled as the causes of volatility.
UK domiciled property funds have risen to a slightly lesser extent, with the median fund up 9.42 per cent and the best fund up 29.84 per cent. And the worst fund is down 5.37 per cent on last year.
Global real estate indices gave positive returns in both the first and second quarters of 2012 - one of the few major sectors to do so. Analysts say developed Asia and China in particular have bolstered its resilience in the second quarter.
And Linda Jane Coffin, director at S&P Capital IQ, says prime real estate in Germany, the UK and the Nordic areas looks the most attractive for UK investors, particularly when compared with other asset classes such as government bonds. "No fund managers are greatly bullish at the moment, but these countries could provide a potential cushion as they can offer the best yields," she says.
On the whole, the funds S&P reviewed did not deviate significantly from their benchmarks at the regional or subsector levels and either neutral or overweight retail, with most near to benchmark in residential. They are currently focusing on identifying the best ideas within each region because they are having such difficulties calling the cycle.
Jason Hollands, managing director at Bestinvest, says he currently prefers property securities to physical property funds. "Everyone should have a small exposure to commercial property in their portfolio as they can benefit from the yield, and there's a strong case for having global reach as growth and development opportunities are more limited with domestic property," he says.
First State Global Property Securities (ISIN: GB00B2PF382) is invested in a global portfolio of property shares rather than bricks and mortar and has earned a place in our Top 100 funds.
Bestinvest's recommended global property funds
| Fund | TER (%) | 1 year performance | 3 year performance | 5 year performance |
|---|---|---|---|---|
| Schroder Glb Prpty Inc Maximiser A Acc | 1.73 | 13.72 | ||
| Schroder Glbl Property Securities A Acc | 1.67 | 15.22 | 42.83 | 15.67 |
| TR Property | 0 | 15.92 | 22.57 | 6.55 |
| Source: Morningstar on 7 November 2012 | ||||
