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Hybrid property funds: another option

Considering the problems encountered by the sector in recent years, it might seem odd that a new open-ended property fund has entered the market. Yet this one promises to be different. Time: Property Long Income & Growth fund (GB00BMH82X78) will take a “unique” hybrid approach, holding both real estate securities and directly held property assets.

The rationale makes sense: with around a third of assets in direct property, 7.5 per cent in cash and the rest in real estate shares, the fund will seek to offer better liquidity than open-ended funds that focus purely on holding property directly, with lower volatility than a portfolio of listed real estate securities. While investment trusts are generally the best option for accessing illiquid assets, this might appeal to investors who don’t want to think about the share price dynamic of a closed-ended fund.

Having said that, I’m not sure this offering is unique: another open-ended fund, BMO Property Growth & Income (GB00BQWJ8794), has applied a hybrid approach for many years. Around two-thirds of this fund were in property shares at the end of July, with 31.6 per cent in UK direct property. Which begs the question: how has the hybrid approach fared?

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