As flows into traditional property investments have accelerated this year, fund buyers have been looking outside traditional assets to more esoteric investment options. Property has been one of the most popular asset classes this year. According to IMA sales figures, a net £315m flowed into the property sector during the month of September, an increase on £242m in August.
A number of prominent fund buyers have labelled property their favourite investment of 2014, and have continued to add to the asset class throughout the year.
However, strong inflows have led traditional open-ended property funds to increase cash holdings as they struggle to cope with this level of demand. For example, SLI’s and Henderson’s UK property funds have doubled in size over the past year to £1bn and £2.4bn respectively, and currently hold 23% and 16% each in cash. This has driven investors to seek out more esoteric investment options that have not been affected by such strong inflows and are in a position to continue taking advantage of the growth trend in the property market. David Coombs, head of multi-asset at Rathbone Unit Trust Management, said he has tried to avoid “chasing hot returns” by allocating to the Santander UK IPD Tracker, a structured note tracking the IPD index directly, and the Tritax Big Box REIT, which invests in large distribution centres. City Asset Management’s James Calder named the Freehold Income Authorised fund run by TIME Investments, which invests in ground rents; and the Target Healthcare REIT, allocating to care homes, as two of his favourite niche property investments.