Model portfolios swap passives for active property exposure

Home-House-Money-Property-700x450.jpgFund manager firm IBOSS has shunned property tracker funds and switched its model portfolios to active managers ahead of rising interest rate expectations.

The firm has moved out of tracker funds and put the assets into the First State Global Property Securities fund on the view actively managed funds will perform better in the upcoming markets.

The £249m First State property fund, run by Stephen Hayes, replaces the Blackrock Global Property Securities Equity Tracker in the model portfolios IBOSS runs on behalf of intermediaries.

Chris Metcalfe, investment director at IBOSS, says an active property manager should outperform a tracking equivalent and potentially provide protection in a volatile market with increased interest rate sensitivity.

“The BlackRock Global Property Securities equity tracker was introduced in November 2013 to give us relatively cheap exposure to global property securities in a low-yielding low interest rate environment,” Metcalfe says.

“This has worked well for us over that period, however the prevailing trend has shifted dramatically since then and blanket market exposure to an asset class so sensitive to bond prices could present more risks to the downside.

“In a rising interest rate environment we feel that an actively managed fund will have a better chance at outperforming through both stock selection and geographical allocations.”

Over one year the First State Global Property Securities fund has returned 4.2 per cent against the 1.5 per cent returned by the Blackrock Global Property Securities Equity tracker and the 0.8 per cent rise in the FTSE EPRA/NAREIT Developed real estate index, FE data shows.