Denise Saunders
Bricks & Mortar or Property Share Funds?
There is a concern that the outstanding returns from bricks and mortar commercial property funds over the last few years are likely to be pegged back. Generally speaking yields have fallen as prices have risen in the UK. The double digit returns provided by these funds are unlikely to continue over the next few years.
As an alternative you may want to look at commercial property share funds. These are slightly higher risk, but provide greater flexibility because fund managers can buy and sell shares in property companies far quicker and cheaper than buildings. These funds can take advantage of market opportunities globally, which provides access to Real Estate Investment Trusts (REITs). REITs are seen as the way forward for property companies as this structure allows for greater tax efficiency than limited companies.
I have suggested to clients that that this may be a good time to switch some of the money held in bricks and mortar funds to property share funds if they are prepared to accept slightly higher risk. I will be recommending property share funds to clients to provide diversification while still indirectly investing in commercial property.
However you should remember the values of the investment will go up and down and the performance the fund previously achieved is not a reliable guide to how it may perform in the future. For investments into “bricks and mortar” the value of the property is generally a matter of the valuer’s opinion rather than a fact and the fund manager may have the right to defer payment under certain circumstances.
If you would like to review your Investments or discuss commercial property share funds contact Langtons today for your no charge or obligation review.