Fund of the Fortnight: F&C Global Real Estate Securities
This is a comparatively new fund, launched in December 2013 and therefore may not be on many people’s radar yet. As the name suggests it invests in listed shares of property companies on a global basis. It aims to beat the FTSE EPRA/NAREIT Developed Global total return index. However it will always have the same sector and country weights as the benchmark (USA 50 per cent, Europe (including the UK) 13 per ent, Australia and Asia 37 per cent), but that does not mean it is a tracker – or at least not completely.
This fund provides a combination of passive and active exposure to real estate securities across the globe, the latter being applied only to regions where the manager has a high conviction that he can add value consistently. In practice this means active stock picking in Europe, US and Australia, but a passive basket of stocks for Asian exposure.
Another unique feature is the ability to short – sell stocks they do not own, where they hope to benefit from falling prices – but only for Europe and US stocks. The fund holds around 180 stocks, picked from a global universe of over 300. The current portfolio has 150 long and 30 short positions.
While the fund may have a short track record, the eight person team behind it, led by Marcus Phayre-Mudge, has a long and illustrious track record of investing in the shares of real-estate companies. This team originally worked together at Henderson, before moving to boutique manager Thames River Capital which was acquired by F&C Asset Management four years ago. The team is separate and distinct to F&C’s physical property fund management business: F&C REIT Asset Management.
While stock selection in Europe and the UK (over 10 per cent of the portfolio, about 60 holdings) follows the in-house process led by Phayre-Mudge, US stocks (about 50 per cent of the portfolio) are chosen by Green Street Advisors (GSA). This dedicated US REITs research house has a 20-year track record and its 20-strong US-based analyst team covers 80 stocks. Phayre-Mudge applies an algorithm to pick stocks (both long and short positions) from GSA recommendations.
In Australia (under 10 per cent of the index, 13 holdings), individual stocks are chosen by Phayre-Mudge’s recently created locally based team.
In Asia (nearly 30 per cent of the portfolio), they pick a basket of 34 stocks from an index of 70 by excluding those with weights under 0.2 per cent.
We expect most of the fund’s outperformance to come from the European and US parts of the portfolio.
We have invested with this experienced manager in the 4-star rated TR Property Investment Trust, and we are pleased to have seeded the launch of this new fund.
Simon Moore is research team leader at Tilney Bestinvest.
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