Fund managers remain cautious on property equities funds, according to the latest review from S&P

Written by Ray Clancy

Thursday, 09 September 2010 09:09

Given the property markets’ dependence on the scale and sustainability of the economic recovery, fund managers remain cautious about the outlook for property equities funds, it is claimed.

Standard & Poor’s Fund Services latest review of the sector indicates that the first six months of 2010 have proven sluggish in terms of fund performance.

‘Property markets themselves saw some recovery at the start of the year. However, this has been very uneven, regionally speaking. This has been particularly true of the residential market, where developing markets have been strong while developed markets have lagged. However, within this, the US looks to be on an improving trend,’ said Susan Sworn, lead analyst at S&P Fund Services.

Over 2009, regions, markets and sub-sectors showed clear variations in performance, the report shows. ‘Within the funds that we cover, managers’ reactions to challenging markets differed,’ Sworn explained.

An example is Fidelity Funds Global Property Funds, where manager Steven Buller tilted the portfolio from a defensive to a more aggressive stance following the Lehman collapse in 2008. ‘Buller focused on stocks that had been hit by market concerns on loan to value and refinancing fears, which left him well positioned when markets rallied in March 2009,’ she said.

On the other hand, the team managing the ING Global Real Estate Fund maintained a defensive positioning throughout 2009. ‘This turned out to be a less successful strategy, with the fund sharply underperforming the peer group median over the year as a whole,’ Sworn added.

S&P Fund Services’ review of the global property equities sector is part of its annual review of diverse global sectors. The review covers around 40 funds in a range of smaller sectors, including energy, financial equities, environmental technology and gold and mining equity funds.