FUND FOCUS: PROPERTY : Best Performer five years

AXA Financial Schroder Global Property Security:+41.68%

Worst Performer five years

New Ireland UK Geared Property 1:-66.71%

PROPERTY FUNDS have had a tumultuous few years. While the early part of 2010 did show signs of a recovery, particularly in European and UK property funds, returns over a five-year period have, unsurprisingly, been poor.

According to data compiled by MoneyMate, in the five years to January 17th, Irish gross domestic funds invested in property returned about -27 per cent on average. The category covered by MoneyMate encompasses property funds spanning a range of geographic areas, as well as direct and indirect funds.

According to MoneyMate, the best performer was Axa Financial Schroder Global Property Security fund, which returned growth of 41.68 per cent. The fund, set up in 2005, is managed by Schroders in New York and has approximately $390 million (€292 million) under management. The fund is an indirect property fund – ie, a fund that invests in international property companies.

Some 44 per cent is in US property, in line with the global property benchmark, while the fund is marginally overweight in emerging markets and the UK and slightly underweight in Europe. Some 10 per cent is invested in Japan. According to David Walls of Axa Financial, the fund’s investment in Asian property companies paid off. The portfolio’s holdings in Hong Kong retail and hotel stocks performed well through the end of the year.

The close to 10 per cent weighting in Japan, was boosted by the Bank of Japan’s allocation of 50 billion yen (€0.45 billion) to support property companies according to Axa.

New Ireland’s UK Geared Property fund was the poorest performer over the five-year period, although the fund has performed extremely well since June 2009 in tandem with the recovery in the UK property market. According to the company, the fund has delivered an impressive 99.6 per cent return over the last 18 months.

The underperformance of the fund over the five-year period according to MoneyMate data is attributable in part to the 33 per cent drop in the UK property market between 2007 and mid-2009, while the geared nature of the fund magnified losses for investors.

While Irish investors remain cautious about property, AXA Financial is cautiously optimistic.

“The outlook is positive and share prices look attractive for long-term investors globally as economic prospects and property markets continue to recover,” says David Walls.