Property funds proving popular with investors

News - Funds

Written by Ray Clancy

Thursday, 07 January 2010 09:35

Property funds remain in vogue and sales are hitting new records while investors also take advantage of the benefits of ISAs, according to the latest statistics from the Investment Management Association, the trade body for the UK's £3,000 billion asset management industry.

In recent months investors have continued to move back into property with the sector the most popular for the second consecutive month, registering net inflows of £417 million in November 2009, the latest month for which figures are available.

This is a big turnaround from January 2009 when property was ranked 28th out of 34 sectors in terms of net retail fund sales, with outflows of £34 million.
November 2009 also saw record breaking gross ISA sales of £987 million. The figure was the highest total outside the March and April ISA season, and more than double the £449 million sold during the same month in 2008.

‘It is good to see investors once again taking advantage of the benefits of ISAs after several years of net outflows. The last few months have seen a resurgence of sales of equity and property funds. This is in sharp contrast to the beginning of the year when bond funds were outselling other asset types and the property sector was seeing outflows,’ said IMA chief executive Richard Saunders.

The numbers also showed retail investors were looking beyond the UK for investment propositions. After Property, the top selling sectors in terms of net retail sales were Global Emerging Markets, Unclassified and Absolute Return. Japan was the worst seller with outflows of around £41 million.

Global equity funds were the most popular retail products after outselling UK equity funds by 36% in November, a significant trend given UK focused equity funds have seen the biggest inflows in 2009 up to November.
Meanwhile, total funds under management for November were up 38% on the same month in 2008 to £467.3 billion, reflecting both record inflows and the recovery of stock markets.
‘The last few months have seen a resurgence of sales of Equity and Property funds. This is in sharp contrast to the beginning of the year when Bond funds were outselling other asset types and the Property sector was seeing outflows,’ added Saunders.

Commenting on the figures, Adrian Lowcock Senior Investment Adviser at Bestinvest, said that considering the recent movements in valuations of property and the continued uncertainty on the strength of the economic recovery he favours prime property assets where there is scope for asset management opportunities to increase rents.
‘We prefer bricks and mortar real estate funds, rather than funds of listed property securities. Some funds have recently had significant inflows and with cash being a drag on performance, we prefer funds with less than 20% cash. Our recommended property funds are New Star UK Property and M&G Property Portfolio,’ he added.