Funds which invest directly in commercial property made headlines for all the wrong reasons earlier this summer, when many stopped investors withdrawing their money following a wave of redemption requests. The move brought home the risks of investing in funds that directly own property – a notoriously illiquid asset. So could investing indirectly in commercial property via funds that hold the shares of property companies, rather than actual buildings, be better?
Open-ended property securities funds invest at least 80 per cent of their assets in listed property companies, and while some will invest their full portfolio in these others put up to 20 per cent in direct property. Adrian Lowcock, investment director at Architas, says the main advantage of property securities funds over direct property funds is that they should always be able to trade their assets. "Because the underlying investments are shares listed on a stock exchange you have a lot more liquidity, as you don’t have to sell a whole property if you need to raise cash," he says.
Colin Low, managing director of Kingsfleet Wealth, thinks the fact that property securities funds trade in listed equities means they are more transparently valued than direct property funds.