Top 100 Funds: Property (4 Funds)

FUND DROPPED: iShares Global Property Securities Equity Index (GB00BPFJCF57)

We have dropped iShares Global Property Securities Equity Index as we now only include active funds in this list. There is nothing wrong with this fund, which has tracked its benchmark well and has a relatively low ongoing charge of 0.19 per cent. When we put together a list of suggested open-ended tracker funds later this year we may well include this one.

TR Property Investment Trust (TRY)

TR Property Investment Trust has about two-thirds of its assets in European listed property companies, alongside UK property shares and direct UK property, which accounts for about 7.5 per cent of its assets. The trust has outperformed its benchmark, FTSE EPRA/NAREIT Developed Europe Capped TR Net GBP index, over one, three and five years both in terms of its NAV and share price returns.

Its investment team, which is led by Marcus Phayre-Mudge, focuses on finding businesses in areas and sectors that provide the prospect of rental growth, and have sustainable debt levels.

The trust has a yield of less than 3 per cent, which is lower than that of many direct property funds. But it has steadily increased its dividend over the past few years and made a payout of 12.2p in its last financial year – up 16.2 per cent on the year before.

F&C Commercial Property Trust (FCPT)

F&C Commercial Property Trust has made positive NAV and share price returns every year since 2009, mostly double-digit or high single-digit in the case of its NAV. It has a yield of over 4 per cent and pays monthly dividends, currently at a rate of 0.5p a share. It has paid a dividend of 6p a share every year for the past 12 years and intends to pay out this level in 2018.

It has 30 properties, with 36.7 per cent of its assets in offices, 30.6 per cent in retail and 12.5 per cent in retail warehouses.

Rob Morgan at Charles Stanley, says: “F&C Commercial Property Trust offers a spread of exposures by region and asset class, but is skewed towards its largest asset in the west end [of London]. I like the experienced management team, and following changes to the cost structure at the start of 2017 it is now among the most competitively priced trusts in its sector. But the yield isn’t typically the highest in its sector due to the manager’s preference for quality assets.”

As non-resident landlords will be taxable under the UK corporation tax regime from April 2020, rather than the UK income tax regime, and this could have an impact on the trust’s tax position, its board is considering applying for UK Real Estate Investment Trust (Reit) status.

Standard Life Investments Property Income Trust (SLI)

Standard Life Investments Property Income Trust makes some of the best NAV total returns of UK direct property investment trusts over one, three and five years, and it has a yield of around 5 per cent. However over shorter periods its returns can be fairly volatile.

Over half of its assets are in industrial properties, and 14 per cent are in retail properties.

A downside to the trust is its relatively high ongoing charge of 2.37 per cent, but funds that invest in physical assets can be more expensive.

Because of its good returns and attractive yield it can at times trade at a high single-digit or double-digit premium to NAV. So it is probably a good idea to invest in this trust when it is at a lower rating – as long as this doesn’t indicate something is wrong.

Tritax Big Box REIT (BBOX)

Tritax Big Box REIT doesn’t invest in offices and shops like many commercial property funds, but rather large logistics warehouses in the UK, which are benefiting from the increase in online shopping. It lets or pre-lets these to major companies such as M&S (MKS), Amazon (US:AMZN) and Unilever (ULVR). It looks to diversify its portfolio by size, geography and tenant, and the assets are typically modern, in prime locations and fully let on long leases. It has 51 investments.

The trust aims for a total net return of 9 per cent a year over the medium term. It is aiming to pay a dividend of 6.7p this year, a 4.7 per cent increase on the 6.4p it paid in 2017. It has increased its dividend every year since launch in 2013 and has a yield of over 4 per cent.

Earlier this year it raised £155.6m via a share issue to fund its acquisition pipeline and asset management initiatives. The trust’s board said in August that its managers have made good progress in deploying those funds, with assets worth around £160m under offer.