As the world tries to make sense of the chaos wrought by the COVID-19 pandemic, it makes sense for investors to seek assets that offer some predictability and consistency.
During such testing conditions the traditional equity and bond asset classes have offered little safety. Stock markets have been volatile since early 2020, while many bonds remain in low or negative yield territory.
Investors are seeking alternative sources of return and more diverse portfolios with assets that can potentially offer more attractive levels of income than bonds, more sustainable levels of income than equities and have the potential for capital growth.
Property funds have long provided an important diversifier for investors moving away from the ups and downs of stocks and the depressed yields from fixed income.
Alongside traditional direct property funds, long income funds have become increasingly popular among income investors looking for inflation-beating returns. And with good reason. The CBRE long income index reported a total return of 3.3% in Q2 2021. Over the same period, mainstream commercial property saw a total return of 3.2% marking the 14th consecutive quarter in which long income outperformed the mainstream market[i].
However, recent events in the open-ended direct property fund market have raised understandable concerns among investors about possible notice periods being enforced.
The Financial Conduct Authority (FCA) has since concluded a consultation on whether property funds should be required to have notice periods of 90 or even 180 days. The regulator has not made a final decision, but mandatory notice periods could be in place by 2023[ii], creating additional operational challenges for property fund managers, and liquidity challenges for investors.
For those who still want to include property in their portfolio without compromising on liquidity, there is an alternative option.
TIME:Property Long Income & Growth invests in both real estate securities and physical property and targets attractive risk-adjusted returns from a blended exposure of securities listed on the stock markets, and physical property that can temper the volatility of the listed securities but still offer attractive returns.
The Fund holds the majority of its portfolio in liquid assets that are usually listed on the London Stock Exchange. These include shares in Real Estate Investment Trusts (REITs) and property securities; investment trusts; ETFs; and collective investment schemes.
There is also the opportunity to invest in non-UK listed real estate securities which allows the managers to access sectors not easily found in the domestic market.
The direct property portion of the Fund invests in long income properties. Unlike traditional property funds with leases as short as seven years, long income investors identify leases extending for decades, providing more consistent and visible income streams.
Using TIME’s proven track record in this sector, the Fund will find properties with rent reviews that are either inflation-linked or have a fixed uplift, rather than being subject to open market negotiation.
Not all commercial property is equal and TIME:Property Long Income & Growth will only invest in sectors that are economically ‘sustainable’. They must demonstrate attractive long-term characteristics and be more defensive in nature. These include supermarkets; logistics; social housing; healthcare and data centres. The portfolio will have no direct exposure to high street retail or office sectors.
Sustainability does not stop at economics. There is also the opportunity for responsible investors to make a societal impact. Many of the properties are in sectors that contribute positively to their local communities and wider society including hospitals, sheltered accommodation and nurseries.
TIME:Property Long Income & Growth is overseen by experienced and specialist managers.
The real estate securities portfolio is run by a team of in-house professionals, with support from highly experienced institutional real estate investment managers. The same team have spent years building portfolios with similar defensive and sustainable securities – notably in TIME:UK Infrastructure Income – that complement the strategies in TIME:Property Long Income & Growth.
TIME also has a consistent and proven track record in managing long income property funds. TIME:Social Long Income is the best performing Fund in the IA Direct Property sector over the three-year period to the end of September 2021[iii].
The last 18 months have tested personal, professional, and economic resolve and taught us that nothing is certain. While there is an indication that a return to normality may be possible, the world has been forever changed by the COVID-19 pandemic.
For investors who want exposure to property with the potential to deliver attractive risk-adjusted returns and better levels of liquidity than a direct property fund, TIME:Property Long Income & Growth could offer the best of both worlds.
The hybrid nature of the Fund provides better liquidity than a portfolio of direct property because real estate securities are listed and can be traded daily.
Reasons to invest in the TIME:Property Long Income & Growth:
[iii] Trustnet, October 2021
Important information: Issued in the UK by TIME Investments (`TIME’) which is the trading name of Alpha Real Property Investment Advisers LLP (`Alpha’) a subsidiary of Alpha Real Capital LLP, both of which are authorised and regulated by the Financial Conduct Authority. ARC TIME Property Long Income and Growth PAIF (the “Fund” or “TIME:Property Long Income and Growth”). is a sub-fund of ARC TIME:Funds II, an umbrella company authorised and regulated by the Financial Conduct Authority as a Non-UCITS Retail Scheme (“NURS”). Please note there is no guarantee that the investment objectives of the Fund will be achieved. The value of investments and the income from them may fall as well as rise as a result of fluctuations in market, currency or other factors and investors may not get back the original amount invested. TIME may source data from third party data providers but accepts no responsibility or liability for the accuracy of data. Applications for shares in the Fund can only be made via an Application Form after reviewing the Key Investor Information Document (“KIID”) and the Prospectus and investors should carefully read the risk warnings contained within. All documentation is available on request. This document does not constitute investment or tax advice and potential investors are required to seek professional advice before investing. Specific Fund Information: The underlying investments in the Fund consist wholly or substantially of real property or shares; the value of the real property concerned will generally be a matter of valuer’s opinion rather than fact; under certain market conditions investors seeking to redeem their holdings may experience significant restrictions or delays. Achieving the Fund’s investment objective will depend on a wide range of factors relating to the wider economy, regulations or specifically to property companies and bonds into which the Fund invests. There may be limited diversification across sectors and assets. In addition, the value of any investment in equity markets is volatile and the Fund’s share price may be volatile due to movements in the prices of the underlying equity and fixed interest security holdings. Fund Status: The Fund is a Non-UCITS Retail Scheme within the meaning of the rules contained in the Collective Investment Schemes Sourcebook (the FCA Regulations) published by the FCA as part of their Handbook of rules made under the Financial Services and Markets Act 2000 (the Act). All information correct as of October 2021.Posted: 29/10/2021 Categories: Income, News, TIME:Property Long Income & Growth