New research with UK wealth managers and financial advisers shows a growing focus on property investments as a route to de-risking through diversification and achieving an increased focus on ESG.
The research, commissioned by TIME Investments which specialises in real asset income-producing funds, shows that 70 per cent of respondents are targeting between 11 per cent and 20 per cent allocation to property as part of their clients’ portfolios. More than two thirds (67 per cent) of advisers surveyed are using UK direct property (funds that directly own physical assets) and 30 per cent are allocating to listed property such as REITs.
The research shows that investment in property funds is set to rise, with over half of respondents (53 per cent) expecting to increase their clients’ allocation to direct property over the next 12 to 24 months, with 47 per cent keeping allocations the same. Half said they expect to increase their allocation to listed property, such as REITs, over the next 12-24 months, with 49 per cent expecting no change in allocation. In both cases, the research shows that the increased focus on investing in property funds is driven by a desire to de-risk portfolios through diversification, followed by an increased focus on ESG.
Advisers and wealth managers are also keen to explore innovative options to enable their clients to access property investments. For example, the majority (98 per cent) of those interviewed said they would be likely to recommend a ‘hybrid’ property fund to a client, which provides a unique blend of direct property and listed securities such as REITs.
When asked to select the top three reasons for selecting hybrid property funds for their clients, 70 per cent selected their ability to provide attractive risk-adjusted returns and two thirds (67 per cent) selected their ability to lower volatility when compared to a portfolio of listed real estate securities. A further 53 per cent selected the attractive diversification benefits hybrid funds offer across a wide range of property sectors.
Roger Skeldon, Head of Real Estate and Fund Manager at TIME Investments, says: “The outlook for UK property is looking positive. In the physical property sector, yields are stabilising, and rental growth will be the key driver of returns. We are seeing a positive reaction to the recent interest rate cut and there is more diversity in the larger REITs as the UK market has matured, meaning exposure can be more effectively spread across different property sub-sectors.
“Our research shows that advisers and wealth managers are increasingly looking to property investments as a route to diversification and a way to help their clients achieve attractive risk adjusted returns, without the volatility associated with mainstream equity investments.”
