This article is part of Morningstar's Guide to Alternative Investing; providing everything you need to know about property, commodities, infrastructure and other diversifying assets.
TR Property (TRY)
TR Property represents one of our highest-conviction ideas for active management within the pan-European real estate sector, says Morningstar analyst David Holder.
The management team here give significant cause for confidence. It is led by Marcus Phayre-Mudge, who has extensive knowledge of physical and listed real estate and has been involved here from the mid- to late 1990s. He is supported by five other investment professionals and three portfolio and administrative support personnel. Thames River Capital LLP is a wholly employee-owned enterprise for whom TR Property is a key client; it accounts for around two thirds of the assets they manage.
The process has been honed over many years and gives analysts a high level of confidence. The team believes that listed real estate markets aren’t efficient and certainly not transparent and that it can capitalise when these factors lead to miss pricing of securities. Ideas are garnered through more than 100 company visits per year and on-the-ground research to access rental and capital markets throughout Europe. The management of UK physical portfolios also provides excellent market participant intelligence, and the team can draw upon its extensive network of industry contacts established over many years.
First State Global Property
Stephen Hayes assumed control of this strategy in September 2012, when he rejoined the firm as head of property securities after a six-year stint at Perennial Real Estate. Results have been mixed under Hayes thus far, says Morningstar analyst Fatima Khizou.
Hayes implemented some incremental process enhancements after taking over this strategy in late 2012, such as adding detail to the stock models and incorporating direct property research from three providers. But the essential process used by CFS remains in effect. It’s a combination of top-down and bottom-up research, emphasising the latter. The team considers the macroeconomic environment and the conditions for property across regions and assesses the impact these may have on individual stocks within each region. Stocks must have gearing levels below 60%, or interest coverage greater than 1.5 times, to be included in the portfolio.
Henderson UK Property
Manager Ainslie McLennan reopened the £3.2 billion fund in October following a trading freeze in the wake of the Brexit vote, but admits that the full effect of the EU referendum are yet to be felt.
“It's pretty much business as usual, we are a very income focused fund,” she told Morningstar last month. “We've tried to sell out things where we've made a good returns, but also to make sure what is remaining in the fund was very robust in terms of that income stream and that’s been our focus. That should be reassuring to people as we go into next year invoking Article 50.”
