Following the Brexit vote, and the subsequent suspension of some UK property funds, commercial property as an asset class has remained out-of-favour, offering lower earnings prospects over the short term. Despite all the noise, returns are expected to revert over the long-term, and we continue to have a positive outlook.

Traditional supply and demand fundamentals including from overseas, look supportive of recovery, and the market remains strong in terms of numbers of participants. Our exposure to the asset class comes in the form of the M&G Property fund, a long standing and well respected direct property fund with a highly experienced management team. The fund forms a key defensive holding within the portfolio and continues to offer a high level of diversification from other assets, helping us to mitigate excess risk.

Fund manager Fiona Rowley has retained a higher cash percentage which is likely to remain above 15% due to market uncertainty and liquidity needs. This is expected to continue into 2018, however she highlights that the team is also poised to use the increased cash to take advantage of opportunities as they arise. The strategy for holdings has also been amended to reflect the reality of a post-Brexit landscape, with a higher allocation of industrial property and an increase of holdings outside London.

Overall, while we appreciate that returns from this fund may be lower over the short-term, we stress our longterm outlook. We also recognise the high level of income the fund continues to provide to holders while offering that diversification; and so we continue to believe the M&G Property Fund has a place in our portfolio.




Risk warnings: Opinions constitute our judgement as of this date and are subject to change without warning. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your initial investment. Where an investment involves exposure to a foreign currency, changes in rates of exchange may cause the value of the investment, and the income from it, to go up or down. The information in this document does not constitute advice or a recommendation and you should not make any investment decisions on the basis of it.