Firms boost weighting to UK property

Large property funds from Aviva and M&G have piled more money into the British market, despite fears of a double-dip recession.

The manager of the £1.8 billion Aviva Property trust holds about half his fund in UK retail properties, although government job cuts are likely to hit the British consumer.

Philip Nell cut his cash position from 29.8% to 20.8% in the first half of the year to fund a small purchase of property shares and six direct property deals, including five in high-street retail and retail warehousing. (article continues below)

He says he focused on areas with lower government employment that would not prove as sensitive to state job cuts.

According to Nell, the fund will keep liquid assets in reserve to guard against the threat of redemptions if the British economy undergoes another downturn.

The £1.6 billion M&G Property portfolio has also invested a further 7% in properties with high yields in anticipation that rents will stabilise.

According to Fiona Rowley, the manager, rents fell in most sectors.

“The market has seen a good rally since last July and that has slowed, leaving it at sustainable levels. There is unlikely to be significant capital growth from here, but we are finding enough opportunities at good valuations.”

However, Nell says prime high-street yields have already decreased from 6.25% to 5%.