Property funds can offer solid long-term performance and can provide a valuable addition to a balanced portfolio. There is a well known tendency for investors to run to solid – or solid-seeming – assets in times of trouble. Gold and silver, commodities of all types, even the better sort of government bond, have all caught the eye of the jaded since the stock markets began to crumble. But is there anything more solid than property?

Many people think not. British people especially tend to see the money invested in their homes as the most secure of all their assets. Expats – who by the nature of things live a peripatetic, often insecure, life – have always invested heavily in property. The buy-to-let market has always been attractive to expatriate investors, for instance. But buying property directly involves a lot of paperwork and concentration on managing the actual property itself – time that many don’t have.

One way of gaining access to often healthy property markets without the hassle of estate agents, lawyers, rental agents or tenants is to invest in a dedicated property investment fund. These funds pool investors’ money and buy up bricks and mortar with it. Like other more familiar investment funds they then parcel out any income gained.

Over the last few years, a few of these collective property funds have set up on an offshore basis. Equally important, they are increasingly likely to be open to private investors whereas usually they have only been open to the very rich, or to so-called ‘institutional investors’, meaning pension funds or insurance companies.

One of the more prominent offshore property funds is the Premier Diversified Property Fund (that’s the name of the company that runs it as well). It is based on the Isle of Man and asks for an initial investment of £11,000 – by no means suitable to everyone, then, but considerably more open than more traditional property funds, which ask anything up to £1 million as an initial stake.

David Connor, UK regional manager for the fund, says that property funds are useful additions to an investment portfolio for two main reasons. One is that property is historically uncorrelated to mainstream investments such as the stock and bond markets. Put simply, that means that property generally does not move in tandem with stock or bond markets.

The second reason is that property can provide a very solid long-term income stream, without the volatility that often accompanies other markets. House prices, for instance, tend to move on a solidly upward track, and even the crashes that have sometimes happened in the UK market are one-offs. Rental income, too, is pretty predictable and moves on an upward track.

“We invest solely in the UK market, for instance,” says Connor. “It’s a good market for property investment, both because there is a lot of private property – including the important commercial rental property – available and because rules and regulations on property ownership make it very stable.”

Minimum leases on commercial properties are for 10 years, notes Connor, giving a certain guarantee to any investment in them. “The income yield on this sector has been about seven per cent in recent years, which is healthy,” he adds.

The fund has attracted £25 million in its first year of operations, according to Premier. Returns on the sterling part of the fund have been 8.7 per cent in the first year. The euro part has returned 8.6 per cent. Both are net of charges.

One thing that investors should bear in mind is that these funds really are long-term, and there are often heavy penalties for early withdrawal. Premier, for example, will hit investors for a 9 per cent charge if they take their money out within the first year. That penalty reduces by 0.45 per cent each year for five years, after which there is no penalty. So investors should be prepared to lock their capital up in such a fund for at least that length of time. Property funds are, partly for that reason, often used for retirement planning, or for anticipated spending like school fees.

There are relatively few offshore property funds – no more than half a dozen, according to experts. Combined, they add up to between £750 million and £1.5 billion.

One key thing investors should look at is what sort of property they are invested in. Big commercial buildings leased to blue-chip names on a long-term basis are obviously the most solid. So-called ‘upward-only rent reviews’ are useful too, since this means that income is guaranteed.

There is a trade-off, though, between solid long-term leases and rental yields. Companies that sign up for long leases pay less rent than short-term leaseholders. Funds that own mainly short-term leases are often able to produce higher returns, but at potentially higher risk.