Many investors have flocked to property in the last year to take advantage of the yields on offer, but Gary Reynolds at Courtiers said direct investment in bricks and mortar looks much more attractive now.
Wealth managers have been flooding property trusts with cash in a bid to capitalise on the UK housing market recovery, pushing trusts - such as the F&C Commercial Property trust - on to significant premiums.
Courtiers chief investment officer Reynolds is also keen to increase exposure to the asset class, but said he wants to take a more direct route by buying in to commercial properties themselves, rather than via shares in trusts.
He said: “We made a call to go completely out of property in December 2006 and we have not been back since.
“Now we are starting to look if there is any scope for buying. Rather than going through a trust, we may go directly to bricks and mortar.”
The firm has already made attempts to gain material holdings, with an ultimately unsuccessful bid to own ground rents. It is now working to identify a suitable acquisition.
Reynolds said unlike trusts, it is very difficulty comparing properties when you buy direct. “We do not think interest rates will go up that much, so if you can get returns over 3%-4% and the covenant is with the occupier, you are going to get the income.”
Owning properties also offers more control, he added: “If you own shares in a company you can vote, but if you own a property you can take a more active role.”
A key risk for property investors is the lack of liquidity, with Aberdeen Asset Management’s multi-manager team avoiding the asset class altogether on these risks.
However, Reynolds said his firm is very careful about liquidity: “The only way we can manage the risk is by having it as a small part of the portfolio.”
