UK property & real estate funds – 3 year performance
by investor fear and greed
which is a pretty stupid
point of view in my eyes.
Gold can help you from a
long-term perspective, but
if you just rush into gold
because you have a bad
feeling and are just running
away from something, it is
not very clever.”
l Commodity hedging
He adds: “If you think
about gold, what does it
represent? I think the function
of gold should be
much more in the mind of
investors as a non-debt
security, which has a function
to preserve its value. I
would have gold in my
portfolio that provides
freedom when the monetary
system collapses for a
short time, something that
you can use as a replacement
for money and that
keeps its value.”
One problem with
investing in gold is how to
do so, with Mueller positing
that any investment has to
be backed by the physical
asset and not in a debtsecurity
or a note, saying:
“If you think about your
need for gold as an investment
– a safe haven and
hedge against inflation –
and you wrap it in a debt
security, you must be completely
brain dead to do so.
This kind of fund wrapper
does not protect you from
the rise and fall of the asset
itself, but from the issuer.”
Gwyther describes himself
as not a great bull of
gold in terms of his central
asset allocation, and is puzzled
by some of the overall
commodity valuations. He
buys into the International
Monetary Fund’s findings
that showed a close relationship
between industrial
production and the price of
the commodities allied to
that industrial production. It
says when industrial production
is booming, then
the demand for those com-
250
200
150
100
%
50
0
North America
-50
’00 ’02
Source: Morningstar
Global
’04
UK
SPECIAL REPORT REAL ASSETS AS INFLATION HEDGE
Curr Fund 1 year 3-year 3-year 3-year 3-year 3-year Launch Domicile
size (£m) chg (%) chg (%) Sharpe Sortino Alpha Beta date
Royal London Exempt Property Acc £ 177.13 8.28 -4.67 -0.89 -0.87 -10.32 0.33 31 May ’91 UK
L&G UK Property L £ 235.67 10.53 -5.75 -0.99 -0.98 -11.15 0.35 27 Feb ’06 UK
Ignis UK Property Acc £ 573.88 14.01 -7.67 -0.97 -0.95 -12.80 0.37 22 Dec ’04 UK
M&G Property Portfolio A Inc £ 1,174.50 10.81 -8.25 -0.96 -0.94 -13.28 0.38 8 Nov ’05 UK
St James’s Place Property Acc £ 107.97 20.81 -8.87 -1.08 -1.04 -13.32 0.45 8 Jan ’07 UK
SWIP Property Trust Acc £ 1,942.14 4.73 -9.40 -1.28 -1.18 -15.11 0.35 15 Nov ’04 UK
Aviva Investors Property Investment £ 185.6 6.63 -10.18 -1.22 -1.14 -15.69 0.36 24 Mar ’03 UK
Skandia IM Property Acc £ 354.88 5.76 -11.17 -1.28 -1.17 -16.48 0.40 2 Dec ’05 UK
New Star UK Property A Acc £ 703.74 10.69 -11.58 -1.22 -1.13 -16.80 0.40 14 Jun ’99 UK
M&G Property Institutional A £ 336.95 9.96 -13.42 -1.28 -1.15 -19.19 0.36 10 Mar ’04 Guernsey
Baring Multi-Mgr Prpty Companies A £ 62.29 71.00 -21.70 -0.87 -0.99 -18.01 1.10 4 Jan ’08 Ireland
Aberdeen Property Share A £ 198.77 34.33 -26.17 -1.28 -1.35 -22.73 1.18 1 Oct ’90 UK
The Glanmore Property £
Source: Morningstar
£ 229.21 -58.19 -40.38 -2.38 -1.56 -54.85 0.26 17 Apr ’97 Guernsey
modities is booming; when
industrial production rolls
over, so does the demand
for those commodities.
“The thing that puzzles
me on the commodity side
of things at the moment,”
Gwyther says, “is the balance
between how much of
the price is down to the
structural argument over
emerging economies, and
how much is down to
investors/speculators who
have not been in the asset
class before? There are certain
commodities where the
inventories on the London
Metals Exchange are at
record levels, yet the price
is still going up. You do not
have to be a rocket scientist
to work out there is some-
Prprty & real estate fund p’mance – 10 yrs
MSCI World
’06
thing not quite right and
things like that make the
commodities space more
difficult to reconcile a fundamental
valuation/demand
with the actual price.”
Investing in commodities
as a hedge against inflation
is tough for portfolio
constructors. Given the size
of some of the funds, many
are still taking the equity
route into the £8bn Barings
World Mining, the £2bn JP
Morgan Natural Resources
or the £2bn BlackRock
Gold and General funds.
l Diversification
Ed Jones, head of institutional
sales at Neuberger
Berman, says that for him it
is all about commodities as
an asset class in its own
right and commodity futures
specifically as investors are
effectively getting exposure
to the real asset but in a
liquid format.
“The reason institutional
investors go into the asset
class is for diversification,
as it is has a low correlation
to other asset classes, and
for inflation protection.
Typically what investors
have tried to do on commodities
is to go into an
index that has a heavy
MARCH 2010 [www.portfolio-adviser.com] PORTFOLIO ADVISER
’08
’10
What we find is if
inflation comes, gold
will protect you; but
if not, or if it does
come but gets no
higher than say 3%
or 4%, having gold is
a great diversifier. So
in some senses you
are buying gold as a
very cheap insurance
product
“
”
Juan Carlos Artigas, investment
research manager, World Gold
Council
SUMMARY
The consensus from
investment managers is that
inflation will reappear but not
until the end of this year at the
earliest.
Investors, however, are
worrying about it now and
their concerns are over asset
price inflation as much as
consumer or retail price
inflation.
Real assets such as property,
commodities and gold come
into their own as their prices
keep track of inflation as well
as providing the potential for
attractive returns in their
own right.
25
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