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Property Funds v REITs
Joe 90
Posted: 10 June 2018 06:59:39(UTC)
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I am looking to diversify my equity-heavy portfolio through property investments rather than bond funds which I’m not keen on due to the heavily predicted impending interest rate increases.

I am considering a mix of global property funds and UK listed REITs. I’m looking to buy and hold and take income so REITs look the right choice. Global funds offer further diversity.

It’s hard to know what to choose. I read recently about funds investing in ‘metacities’ (eg LA, Shanghai, Pearl River delta, London) which made good sense in view of demographic trends.

I’ve also picked up a couple of suggestions on REITs (TR Property and Regional). Both look sound.

Grateful for any thoughts.
Keith Cobby
Posted: 10 June 2018 09:05:48(UTC)
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The first property fund I bought was TR Property and it is now the only one I hold. Excellent manager and performance. Reasonable yield (if this is important) and good spread of investments. Interesting recent comments by the manager on UK property.
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Tim D on 10/06/2018(UTC), Mr Helpful on 10/06/2018(UTC)
Mr Helpful
Posted: 10 June 2018 09:29:58(UTC)
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Joe 90;63662 wrote:
I am looking to diversify my equity-heavy portfolio through property investments rather than bond funds which I’m not keen on due to the heavily predicted impending interest rate increases.
It’s hard to know what to choose.
I’ve also picked up a couple of suggestions on REITs (TR Property and Regional). Both look sound.
Grateful for any thoughts.

General : The traditional 'Alternatives' seem to be Real Estate, Infrastructure, Private Equity, Commodities (Income), and the newly fashionable Renewables.
As no guarantees that any of that lot will zig as Stocks zag, there is a case to also hold Cash and short-duration IG Bonds, to take advantage of any Stocks slump.
Of that lot, Private Equity has exhibited the highest correlation to Stocks well in excess of +1.00, so while a useful Asset Class not much help as a diversifier.

Aim : to get some sort of +ve real yield on Non-Stocks?
Driving force for many investors today.

Real Estate : Also toying with the idea of moving back into RGL, having sold @ 105.78 June 2017, but the short history and debt levels are dampening the enthusiasm. Just on Watch-List as a firm maybe.

Almost too many Real Estate choices !!!
Own present slightly haphazard holdings list, certainly not recommendations :-
GRIO (something similar to IL Gilts, but deeply unpopular today)
BLND, LAND, BBOX, HSTN, NRR, RLE
On Watch-List also SGRO.


P.S. Quite like the idea of TRY; maybe add to own Watch-List?
Not an obvious diversifier if price history any guide.
t s
Posted: 10 June 2018 10:12:47(UTC)
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I hold Grainger (GRI), PSDL, Land Secs, Hammerson, ,Shaftesbury SHB (recent purchase), IUKP, UKRE, PHP & AGR
Tyrion Lannister
Posted: 11 June 2018 01:11:34(UTC)
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Mr Helpful;63665 wrote:

As no guarantees that any of that lot will zig as Stocks zag, there is a case to also hold Cash and short-duration IG Bonds, to take advantage of any Stocks slump.


Do you mean government or corporate bonds and could you give some examples?

To say the least, I'm no expert on bonds and tend to hold cash as my safety net. I do have a small holding in the 24 Dynamic Bond Fund which, going by its top ten listings, holds a mixture of government and corporate bonds with a maximum duration of around 6 years.

I've been thinking for a while that I should diversify a little more but am worried that bond prices are even more fragile than equities right now?
Mr Helpful
Posted: 11 June 2018 08:23:36(UTC)
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Tyrion Lannister;63687 wrote:
Mr Helpful;63665 wrote:

As no guarantees that any of that lot will zig as Stocks zag, there is a case to also hold Cash and short-duration IG Bonds, to take advantage of any Stocks slump.

Do you mean government or corporate bonds and could you give some examples?
I've been thinking for a while that I should diversify a little more but am worried that bond prices are even more fragile than equities right now?

Sorry no easy answers.
Bonds esp short-duration offer sub-inflation yields.
The good news is that they are unlikely to fall as much as Stocks in a set-back. But that is scant advantage over Cash.

IMO it is all about seeking a balance in Non-Stocks, such that the pathetic yields on safer Bonds are compensated for by the better yields on Alternatives, to eke out a +ve real yield overall, while we wait for Stocks to succumb a little (maybe).

IGLS : ST Gilts (presently not held)
IS15 : ST UK Investment Grade Corporates (held)
IBTS : US ST Treasuries (held unhedged as US$ currency insurance for adding to International Stocks one day).
SDIG : US ST Investment Grade Corporates (held again US$ unhedged, but very low conviction. Might well be an error)

Forays into higher yield Debt include SEQI, GCP, NCYF, but not expecting them to hold up in general sell-off. Not therefore very attractive for defence but yields OK. May well sell at some point.

P.S. Am also among those dubious about the role of longer duration Bonds supposed to offer meaningful -ve correlation to Stocks in flight to safety. History not conclusive.
Watching IGLT, VUTY, but severe doubts holding back see :-
http://www.multpl.com/10-year-treasury-rate
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Tyrion Lannister on 11/06/2018(UTC), Mike L on 11/06/2018(UTC), Tim D on 12/06/2018(UTC)
Tyrion Lannister
Posted: 11 June 2018 14:14:07(UTC)
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Thanks Mr H.

I've been thinking about my portfolio (SIPP) from a strategic viewpoint and am coming to the conclusion that I'd be best with a mix of equity growth funds, property (funds & REITs) and corporate bonds while continuing to hold 10 - 15% cash as a safety net.

I'm currently about 70/30 equity growth/income with a smidgeon of property and bonds. I could sell most of the equity income funds to buy corporate bond and property funds. That way, I can still take income at retirement but have a degree of diversification. It's not perfect but what is right now?

I was interested to see that most of the property funds you mention are UK. That would give me concern as I think Brexit is going to badly affect UK property prices, both residential and commercial. I'm going to look primarily at overseas property funds and REITs, possibly infrastructure too. I already hold TRY and I am very happy with it so am going to add to that when the time is right.
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Mr Helpful on 12/06/2018(UTC)
Mr Helpful
Posted: 12 June 2018 09:02:58(UTC)
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Tyrion Lannister;63706 wrote:
I was interested to see that most of the property funds you mention are UK. That would give me concern as I think Brexit is going to badly affect UK property prices, both residential and commercial. I'm going to look primarily at overseas property funds and REITs, possibly infrastructure too. I already hold TRY and I am very happy with it so am going to add to that when the time is right.

Valid point.
Makes TRY seem more attractive with UK weighting at only 43%.
Keep us updated as further ideas develop.

P.S. SRE might be a candidate?
S_M
Posted: 12 June 2018 10:36:48(UTC)
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Tyrion Lannister;63706 wrote:
Thanks Mr H.

I've been thinking about my portfolio (SIPP) from a strategic viewpoint and am coming to the conclusion that I'd be best with a mix of equity growth funds, property (funds & REITs) and corporate bonds while continuing to hold 10 - 15% cash as a safety net.

I'm currently about 70/30 equity growth/income with a smidgeon of property and bonds. I could sell most of the equity income funds to buy corporate bond and property funds. That way, I can still take income at retirement but have a degree of diversification. It's not perfect but what is right now?

I was interested to see that most of the property funds you mention are UK. That would give me concern as I think Brexit is going to badly affect UK property prices, both residential and commercial. I'm going to look primarily at overseas property funds and REITs, possibly infrastructure too. I already hold TRY and I am very happy with it so am going to add to that when the time is right.


Funny you should say that, Tritax Big Box think that Brexit will actually work in their favour, citing border controls as increasing the demand for domestic warehousing. Since the Brexit vote, this REIT has given solid performance and a nice yield too.
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Mr Helpful on 12/06/2018(UTC)
JohnW
Posted: 12 June 2018 21:29:49(UTC)
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I also hold TRY. It's been very good to me over the years.
Tyrion Lannister
Posted: 12 June 2018 21:40:58(UTC)
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S_M;63742 wrote:

Funny you should say that, Tritax Big Box think that Brexit will actually work in their favour, citing border controls as increasing the demand for domestic warehousing. Since the Brexit vote, this REIT has given solid performance and a nice yield too.


They would say that wouldn't they! :)

The way I see it is that Brexit will reduce the demand for UK property as a whole, I don't see why warehousing should be any different.
Tyrion Lannister
Posted: 12 June 2018 22:14:40(UTC)
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Joe 90;63662 wrote:
I am looking to diversify my equity-heavy portfolio through property investments rather than bond funds which I’m not keen on due to the heavily predicted impending interest rate increases.

I am considering a mix of global property funds and UK listed REITs. I’m looking to buy and hold and take income so REITs look the right choice. Global funds offer further diversity.

It’s hard to know what to choose. I read recently about funds investing in ‘metacities’ (eg LA, Shanghai, Pearl River delta, London) which made good sense in view of demographic trends.

I’ve also picked up a couple of suggestions on REITs (TR Property and Regional). Both look sound.

Grateful for any thoughts.


Like you, I'm looking to invest in property to diversify my equity heavy portfolio. More specifically, I'm looking to replace some equity income funds so I'm also hoping for good dividends.

I'm already in TRY and have decided to keep and add to that. I'm thinking of complementing this with an infrastructure IT, possibly JLIF. SEQI also looks interesting.

Initially, I was just looking at global (most include UK anyway) and probably still am. However, I am tempted by the superb dividends of RGL and NRR.

I prefer RDI though, this also has a superb dividend but unlike RGL and NRR, it invests outside of the UK.
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Tim D on 12/06/2018(UTC)
Tyrion Lannister
Posted: 13 June 2018 22:44:30(UTC)
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I've almost decided on RDI to compliment TRY.

Any comments/views before I take the plunge would be most welcome.
Mr Helpful
Posted: 14 June 2018 08:49:11(UTC)
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Tyrion Lannister;63858 wrote:
I've almost decided on RDI to compliment TRY.
Any comments/views before I take the plunge would be most welcome.

Check and make sure happy with :-

Dividend history
Earnings history
Debt levels and debt history
Retail exposure
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Tyrion Lannister on 14/06/2018(UTC)
Tyrion Lannister
Posted: 17 June 2018 21:24:45(UTC)
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Mr Helpful;63738 wrote:
Tyrion Lannister;63706 wrote:
I was interested to see that most of the property funds you mention are UK. That would give me concern as I think Brexit is going to badly affect UK property prices, both residential and commercial. I'm going to look primarily at overseas property funds and REITs, possibly infrastructure too. I already hold TRY and I am very happy with it so am going to add to that when the time is right.

Valid point.
Makes TRY seem more attractive with UK weighting at only 43%.
Keep us updated as further ideas develop.

P.S. SRE might be a candidate?


I’m struggling with this tbh. Possibly because I’m over thinking it?

I’m looking for European wide REITs, ideally one industrial, especially BBOX type logistics, and one residential. OEICs are out of the question for obvious reasons.

My favourite industrial trust at present is HSTN but I can’t see anything residential I like, most seem to be UK focused.

I like SRE btw (thanks for the idea), I see from the transactions thread that you’ve dipped you toes into that.

Another option is to forget the residential side, the only ones I like are UK focused and I’m already invested there with my house!

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Mr Helpful on 18/06/2018(UTC)
Tyrion Lannister
Posted: 17 June 2018 21:55:13(UTC)
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Forgot to add, the Tritax Eurobox IPO looks like going ahead and it looks very appealing.

ASLI also looks interesting but that’s already at a 7% premium.
Joe Soap
Posted: 18 June 2018 08:57:40(UTC)
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Just topped up my holding in Regional REIT at 95p. I hold rather too much of this stock but instead of sitting on cash steadily losing value, I decided to go for an 8.5% yield instead. At sub 100p, RGL is a screaming income buy.
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Tyrion Lannister on 18/06/2018(UTC)
mattyboy
Posted: 18 June 2018 16:11:42(UTC)
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Joe Soap;63993 wrote:
Just topped up my holding in Regional REIT at 95p. I hold rather too much of this stock but instead of sitting on cash steadily losing value, I decided to go for an 8.5% yield instead. At sub 100p, RGL is a screaming income buy.


I agree, and have just doubled my stake is Regional.
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Joe Soap on 18/06/2018(UTC)
Tyrion Lannister
Posted: 20 June 2018 00:55:50(UTC)
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RGL: Joe Soap, mattyboy

Fantastic for income, of that there’s no doubt.

But it depends why your investing.
If, as in Joe’s case, it’s an alternative to cash that makes sense to me. Its total return over recent years has been comparable to corporate bonds but these days it’s probably safer.

Otherwise, it might be better to invest in equity income. As always, it’s a matter of prioririties - low risk, income, growth etc.

I’ve been struggling with this dilemma, we’re in unprecedented economic territory for several reasons. I’m looking to balance equity growth with lower risk diversifiers, I would also like an income for retirement in the next 5 - 10 years.
I’ll probably go for an equal split between equity income, bonds and property. That’s for no other reason than I haven’t a clue which is best! :)



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Mr Helpful on 21/06/2018(UTC)
Mike L
Posted: 20 June 2018 06:59:14(UTC)
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Is the dividend for RGL really that great? Morningstar has the yield today at 6.3%, but the ongoing charge at 4.36%. (Going by Morningstar alone, REITs seem to have high charges generally. SLI yield today is given as 4.98%, with an OCR of 2.37%. It's never put John Baron off it, though).
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