FundCalibre picks property and insurance funds for 2017

Juliet Schooling 700

The property sector is among the top picks for 2017 for fund selector FundCalibre, despite numerous challenges for the market over the past year.

In its list of the six fund picks for the new year, research director Juliet Schooling Latter says despite property being “a dirty word” due to the fallout post-Brexit, the asset class remains a valuable choice for investors.

Schooling Latter picks Marcus Phayre-Mudge’s F&C Real Estate Securities fund which also offers exposure to properties in Europe as well as in the UK.

The £86.7m fund invests in both commercial (57 per cent) and residential real estate securities (25 per cent).

Schooling Latter says the managers will often short stocks up to 10 per cent of net asset value on which they have a negative view, which is unusual in their peer group and a big positive for the fund.

Year to date as of 30 November, the fund has underperformed the FTSE EPRA/NAREIT Global Real Estate Index, returning 3.33 per cent against the benchmark’s 4.02 per cent. However the fund returned 48.2 per cent over three years, versus the 36.7 per cent of the index.

The fund saw around £14m outflows between October and December, according to its fund factsheets.

Schooling Latter says: “I still think property has a place in most portfolios. It gives greater diversification and income. An alternative is a fund that invests in property-related shares.

“In the very short term, real estate securities are highly correlated to the wider equity markets, but over the longer term, they have a higher correlation to the underlying property market.”

Elsewhere, Schooling Latter recommends the £587m Polar Capital Global Insurance fund, managed by Nick Martin as it provides access to “a specialist and often undervalued sector”.

For 2017, she says the insurance sector should be watched as one of the least volatile sectors in the market.

Schooling Latter says:”These insurers tend to have management teams who are underwriting with their own money through material stock ownership. Management ownership is crucial – as Warren Buffett says, no one ever washes a rented car.

“Everything around us is insured, regardless of economic boom or bust, so this defensive characteristic, along with the managers’experience of the intricacies of the insurance world, provide the comfort needed by investors in a specialist sector fund.”

Year to date as of 30 November, the fund has returned 29.15 per cent against the MSCI Daily Net TR World Insurance Index returns of 23.75 per cent.