Ignis ace Shaw cuts cash weighting by a third in property fund

Ignis' top performing property manager George Shaw has cut the cash weighting in his £854m UK Property fund by a third in the last few months as he eyes up a move to increase the fund's yield.

Shaw, whose fund has delivered double the sector average return in the last three years, has cut cash levels from 30% to around 20%, moving to take advantage of opportunities across the sector.

He said: "The liquidity in the fund reached close to 30% earlier in the year. However, through careful investment, liquidity is now closer to 20% and we continue to seek suitable assets in which to invest."

The cash weighting has dropped even as flows have come into the fund, and Shaw said his goal now is to boost the fund's net yield from its current level of 5.5% by investing in more assets.

"Ideally we would like to try and get a little more yield into the fund, but that has to be balanced against the relevant occupational demand and the security of the income stream that the prime assets we hold currently offer," he said.

Shaw expects income, rather than capital growth, to continue to drive returns in the property sector for the foreseeable future.

"Total returns in the property market are going to continue to be dominated by income returns," he said. "We envisage property total returns of 7.5%-8% per annum for the next few years, predominantly driven by income.

"Income will be the driver to performance over the short to medium term, with only limited gains from capital appreciation."

Shaw said taking on more risk might be necessary to up the yield over the longer term given prime property was under pressure.

The manager said there was potentially a need to "inch up the risk curve". "With continued pressure on prime stocks investors may have little choice but to look towards upper secondary assets to secure the desired return," he said.

However, in the near term he continued to focus on prime property in central London and the South East, where around 60% of the portfolio is invested.

"In the short term we do think that central London offices and retail will continue to perform more strongly. Outside of these areas we are very much stock rather than sector focused at the moment, looking for good quality stocks," he said.

Shaw's fund has continued to be one of the leading lights in the sector over the last few years, with total returns of 4.3% and 12.3% respectively over one and three years. This compares to a sector average loss of 5% over one year, and gains of 6.2% over three years.

-Phoenix and Ignis correction

On an earlier e-mail alert this week we wrongly attributed a quote on Ignis's fund performance to the CEO of Phoenix. This comment was actually made by Ignis CIO Chris Fellingham. We apologise for any confusion this may have caused.