Miton turns to REITs to avoid UK property liquidity risks


Miton multi-asset fund manager David Jane says he is returning to UK property via REITs, as open-ended funds switch their pricing structures in response to outflows.

Jane “significantly” reduced exposure to UK property at the end of 2015 and into the start of this year, turning instead to fixed income for his “lower for longer” approach.

REITs are appealing due to their liquidity and absence of pricing basis risk, Jane says, which offsets their exposure to movements in equity prices.

Last week, Standard Life Investments, Henderson Global Investors and M&G Investments changed pricing structures at their property funds due to outflows, from the offer to bid price.

The changes in pricing effectively shift costs to those investors selling out of the funds, rather than spreading them evenly across investors.

Morningstar Investment Management has this week announced it had exited UK property in its actively managed portfolios due to increasing liquidity risks.

Jane attributes Brexit worries to recent underperformance of REITs, but he argues fears are overblown regardless whether votes choose to remain in the EU or not.

Jane says UK has emerged as the “capital of Europe” due to its “legal system, benign employment regulations and its use of English” rather than because it is in the UK.

“Whatever the result, we don’t think there will be a material long-term impact on interest rates, sterling or UK employment,” Jane says.

“Of course we may be wrong on this,” he adds.