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    • chrisgg
    • By chrisgg 9th Jan 18, 8:54 PM
    • 45 Posts
    • 30 Thanks
    chrisgg
    • #2
    • 9th Jan 18, 8:54 PM
    • #2
    • 9th Jan 18, 8:54 PM
    To answer your first question, all the funds you've listed are open ended. They will all be listed as OEIC or Unit Trusts, whereas closed ended will be listed under a market index or referred to as an investment trust or a REIT.

    When it comes to investing in direct property, you need to consider what your priority is. If it is diversification, downside protection, then consider something like the L&G fund, which has low correlation to equity markets, and importantly, very low volatility.

    If you're looking for extra diversification, less correlation some downside protection and income, and you aren't concerned about volatility, I'd go for something closed ended. An option here would be something like Standard Life Property Income.

    By way of comparison, a quick google search tells me L&G fund has an FE risk score of 50 and has provided a total return of circa 50% over the last 5 years, whereas the SL trust has a risk of 97 with a TR of 112% over the same period.

    Lastly, well done for avoiding trackers on this one, as I've come across many people who've picked up various property trackers for downside protection without realising they've bought into large cap property firms/a concentrated portfolio of REITs!
    Last edited by chrisgg; 09-01-2018 at 8:58 PM.
    • chockydavid1983
    • By chockydavid1983 10th Jan 18, 10:52 AM
    • 523 Posts
    • 309 Thanks
    chockydavid1983
    • #3
    • 10th Jan 18, 10:52 AM
    • #3
    • 10th Jan 18, 10:52 AM
    Thanks for explaining chrisgg. I probably will be leaning towards the open ended funds in that case or maybe a bit of both.
    • Economic
    • By Economic 10th Jan 18, 11:23 AM
    • 171 Posts
    • 137 Thanks
    Economic
    • #4
    • 10th Jan 18, 11:23 AM
    • #4
    • 10th Jan 18, 11:23 AM
    I would not invest in an open-ended property fund as they are not very liquid as was demonstrated after Brexit:
    https://uk.reuters.com/article/uk-britain-eu-property/number-of-uk-property-funds-suspended-since-brexit-vote-doubles-idUKKCN0ZL13H
    • chrisgg
    • By chrisgg 10th Jan 18, 11:40 AM
    • 45 Posts
    • 30 Thanks
    chrisgg
    • #5
    • 10th Jan 18, 11:40 AM
    • #5
    • 10th Jan 18, 11:40 AM
    I believe L&G (and Kames if I recall correctly) were two that stayed open just after the brexit vote.

    In reality, it would have been foolish to sell at that point anyway, given the drop in value that property funds suffered. Liquidity shouldn't be an issue with these sorts of funds provided you have a cash buffer.
    • chockydavid1983
    • By chockydavid1983 10th Jan 18, 12:14 PM
    • 523 Posts
    • 309 Thanks
    chockydavid1983
    • #6
    • 10th Jan 18, 12:14 PM
    • #6
    • 10th Jan 18, 12:14 PM
    Thanks guys, yeah I read about L&G having stayed open but didn't realise there were others (will look into that). I have a decent cash buffer and am investing for the long term so liquidity shouldn't be an issue.
    • Tcquins
    • By Tcquins 10th Jan 18, 12:23 PM
    • 17 Posts
    • 13 Thanks
    Tcquins
    • #7
    • 10th Jan 18, 12:23 PM
    • #7
    • 10th Jan 18, 12:23 PM
    F&C also stayed open.

    The reasons for the suspension in the majority of these funds, was the bulk multi asset funds sell off on the days after Brexit.

    Not a focused sell off of property per se that caused the suspension. Liquidity may be a perceived risk, but only the dumb money sells off at times of extreme market stress. A patient investor shouldn’t see this an issue. However, funds are building up a much larger cash pile as a result of the Brexit aftermath to avoid suspension happening again.

    Also bear mind the quite hefty spreads on the L&G fund (about 5.2%) so don’t go chopping in and out of it. Although the long performance is pretty solid.
    • sorcerer
    • By sorcerer 10th Jan 18, 1:23 PM
    • 838 Posts
    • 399 Thanks
    sorcerer
    • #8
    • 10th Jan 18, 1:23 PM
    • #8
    • 10th Jan 18, 1:23 PM
    I believe L&G (and Kames if I recall correctly) were two that stayed open just after the brexit vote.

    In reality, it would have been foolish to sell at that point anyway, given the drop in value that property funds suffered. Liquidity shouldn't be an issue with these sorts of funds provided you have a cash buffer.
    Originally posted by chrisgg
    Yes you are correct Kames Property was still open, but they did change the spread to make it more expensive to sell, to try to reduce redemptions. After all of the that, I moved over to investments trusts for property, I didn't like the idea of closing a fund so I couldn't get my money out.

    On the plus side, they tend to be less volatile than investment trusts, since trusts are bought and sold on the market, at least from a price point of view.
    • chockydavid1983
    • By chockydavid1983 10th Jan 18, 1:32 PM
    • 523 Posts
    • 309 Thanks
    chockydavid1983
    • #9
    • 10th Jan 18, 1:32 PM
    • #9
    • 10th Jan 18, 1:32 PM
    Is the spread the difference between the buy & sell price?
    How would I go about finding that out on this and other funds?
    I'm not too concerned here as I'll be buying and holding.
    • sorcerer
    • By sorcerer 10th Jan 18, 1:39 PM
    • 838 Posts
    • 399 Thanks
    sorcerer
    Is the spread the difference between the buy & sell price?
    How would I go about finding that out on this and other funds?
    I'm not too concerned here as I'll be buying and holding.
    Originally posted by chockydavid1983
    Yes that's correct on a lot of OEICs the buy and sell price will be the same. But in the case of Kames at the time, they put a 10% difference between sell and buy, which meant you would lose 10% of the value when you sold them. They did this to try to prevent redemptions.
    • ivormonee
    • By ivormonee 10th Jan 18, 3:14 PM
    • 108 Posts
    • 81 Thanks
    ivormonee
    Here's an overall picture:

    OEICs - no bid/ offer spread, no trading cost, platform fee, poor liquidity in extreme market conditions, good diversification, low relative volatility

    Unit Trusts - bid/ offer spread, no trading cost, platform fee, poor liquidity in extreme market conditions, good diversification, low relative volatility

    Investment Trust - bid/ offer spread, trading cost, no platform fee, excellent liquidity in extreme market conditions, good diversification, high relative volatility

    ETF - bid/ offer spread, trading cost, no platform fee, good liquidity in extreme market conditions, poor diversification, high relative volatility

    For diversification (low correlation) you need direct physical holdings (therefore a tracker fund will be no good). For ability to buy and sell in extreme conditions you need something closed ended. Anything exchange traded will be much more volatile. There's no clear winner; they all have different characteristics. You pick based on personal preferences.
    • chockydavid1983
    • By chockydavid1983 10th Jan 18, 3:37 PM
    • 523 Posts
    • 309 Thanks
    chockydavid1983
    Thanks ivormonee, that's a helpful summary.
    So with the closed ended ones, is what HL refer to as "Average annual charge" the equivalent to the OCF of the OEICs I was looking at?
    • Eco Miser
    • By Eco Miser 10th Jan 18, 3:43 PM
    • 3,320 Posts
    • 3,083 Thanks
    Eco Miser
    OEICs - no bid/ offer spread, no trading cost, platform fee, poor liquidity in extreme market conditions, good diversification, low relative volatility

    Unit Trusts - bid/ offer spread, no trading cost, platform fee, poor liquidity in extreme market conditions, good diversification, low relative volatility

    Investment Trust - bid/ offer spread, trading cost, no platform fee, excellent liquidity in extreme market conditions, good diversification, high relative volatility
    Originally posted by ivormonee
    Whether or not there are trading or platform fees depends on the platform you use.
    IWeb for instance always charges £5 transaction fee, but no platform fee beyond the initial £25.
    Eco Miser
    Saving money for well over half a century
    • chockydavid1983
    • By chockydavid1983 10th Jan 18, 5:41 PM
    • 523 Posts
    • 309 Thanks
    chockydavid1983
    Thanks Eco Miser, that makes sense.
    With these funds, is what HL refer to as "Average annual charge" the equivalent to the OCF of the OEICs I was looking at?
    http://www.hl.co.uk/shares/shares-search-results/s/standard-life-property-inc-trust-ord-1p/costs
    Also, what controls if you can buy in, how much and at what price? Do you have to wait for someone to sell?
    Last edited by chockydavid1983; 10-01-2018 at 5:44 PM.
    • Linton
    • By Linton 10th Jan 18, 6:01 PM
    • 8,853 Posts
    • 8,884 Thanks
    Linton
    I would not invest in an open-ended property fund as they are not very liquid as was demonstrated after Brexit:
    https://uk.reuters.com/article/uk-britain-eu-property/number-of-uk-property-funds-suspended-since-brexit-vote-doubles-idUKKCN0ZL13H
    Originally posted by Economic
    On the other hand surely one of the main reasons to buy into property is to diversify from the equity market. It seems somewhat perverse to then choose a market quoted vehicle.
    • bowlhead99
    • By bowlhead99 10th Jan 18, 6:51 PM
    • 7,130 Posts
    • 12,940 Thanks
    bowlhead99
    On the other hand surely one of the main reasons to buy into property is to diversify from the equity market. It seems somewhat perverse to then choose a market quoted vehicle.
    Originally posted by Linton
    In some sense it does, but: we all accept that property is illiquid so that if you find yourself holding it during some bad times, you either might not be able to get out (of an open ended fund, due to redemption freeze), or you might have to accept a lowball price if you want to get out (of a REIT-type listed vehicle, due to it trading at a discount on the stock exchange).

    The latter route (closed ended listed vehicle) has a few clear advantages:

    - if you *do* really want to get out during the bad times and are willing to accept a poor price to do so, there will generally be the ability to do that if you really want. Access to 80% of 'fair' NAV is better than no access at all. You're not forced to take it if you don't want to;

    - in the 'bad times' in a closed ended vehicle, there is no risk that the fund manager will have to dispose of a property he wants to keep, to meet the cashflow demands of fickle investors who want/need an exit. The fund manager still has his fixed pool of capital to keep invested. Rather than having the distraction and cost of selling decent assets at lowball prices, which can both be harmful to NAV. This concept also means he can be more fully invested at all times without the performance drag of maintaining a liquidity pool of cash.

    - when the price is low due to property sector being valued relatively worse than other asset classes, you can pick up a bargain when you rebalance cash from other sectors into listed property vehicles which trade at a discount at those times. Whereas with open ended funds priced at NAV, if you are trying to top up your holdings in the sector you can't generally buy at any substantial discount to NAV, and you might not even be able to buy at all if they are closed to both subscriptions and redemptions due to not having faith in the last-valued NAV in a 'crash' scenario.

    So, closed ended funds can be a decent way to approach the sector. You just have to recognise that the timing of price/valuation swings in your shares can differ from the timing of valuation changes in an open ended fund with direct property. That's not all bad news anyway as you can recover from a crisis faster than an open ended fund because the price for your REIT shares will rise when the positive sentiment returns to the market; while by contrast, the price for units in an open ended direct property PAIF is not controlled by such sentiment and has to wait until a RICS qualified surveyor or other suitable specialist has had a chance to go and value the underlying properties at a new higher value, which he might not be doing for six months or so.

    FWIW, I and family have some generalist direct property PAIFs but also some specialist listed vehicles. It's not a "one size fits all" sector. You just need to be comfortable with whether the vehicle type suits both the fund's strategy and your own objectives and level of understanding. There are of course, pros and cons of different types.

    I'm quite comfortable with IT-type holdings as they are not as complex as some people imply, but different people learn concepts in different ways and so some may have more apprehension toward them notwithstanding the pros and cons.
    • chockydavid1983
    • By chockydavid1983 11th Jan 18, 11:02 AM
    • 523 Posts
    • 309 Thanks
    chockydavid1983
    Thanks guys, I think I now have a better understanding of the sector in general. I'm just trying to work out why a closed ended fund would be cheaper than a PAIF offered by the same company. Logically to me, it feels like closed ended should have higher charges but more volatility and higher overall gains in the long run as more of its cash would be invested in property at any one time? Of course, these funds could be very different in their objectives etc and I could be missing other things?
    http://www.hl.co.uk/shares/shares-search-results/f/f-and-c-uk-real-estate-investments-limited-ord/costs
    http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/f/f-and-c-uk-property-paif-class-2-income
    • Eco Miser
    • By Eco Miser 11th Jan 18, 11:24 AM
    • 3,320 Posts
    • 3,083 Thanks
    Eco Miser
    Thanks Eco Miser, that makes sense.
    With these funds, is what HL refer to as "Average annual charge" the equivalent to the OCF of the OEICs I was looking at?
    http://www.hl.co.uk/shares/shares-search-results/s/standard-life-property-inc-trust-ord-1p/costs
    Originally posted by chockydavid1983
    No, that appears to be HL's platform and transaction fees, as a percentage of the value.
    See https://uk.standardlifeinvestments.com/ifa/dynamic/investment-trust-detail.html?PriceId=SLI for SLI's own literature.
    Also, what controls if you can buy in, how much and at what price? Do you have to wait for someone to sell?
    Originally posted by chockydavid1983
    Technically, yes. In practice, for 'normal' volumes, no. Your platform/broker will find those willing to sell and offer you the chance to make a deal with the lowest offer.
    SLI is an investment trust, which is a company whose shares are dealt on the London Stock Exchange. I learnt the principles long ago, when stock jobbers walked the floor of the exchange. That's all changed and now I only know you ask to buy, and get 15 seconds to accept the offered price.
    Eco Miser
    Saving money for well over half a century
    • chockydavid1983
    • By chockydavid1983 11th Jan 18, 2:13 PM
    • 523 Posts
    • 309 Thanks
    chockydavid1983
    Thanks Eco Miser, looks like it's 0.75% on that one then as opposed to the PAIF offered by them at 0.88%:
    https://uk.standardlifeinvestments.com/IT_Property_Income.pdf
    Last edited by chockydavid1983; 11-01-2018 at 2:44 PM.
    • bowlhead99
    • By bowlhead99 11th Jan 18, 2:59 PM
    • 7,130 Posts
    • 12,940 Thanks
    bowlhead99
    Thanks Eco Miser, looks like it's 0.75% on that one then as opposed to the PAIF offered by them at 0.88%:
    https://uk.standardlifeinvestments.com/IT_Property_Income.pdf
    Originally posted by chockydavid1983
    Don't confuse the management fee figure with an ongoing charges figure that includes management fees and various other running costs.

    At the end of the day though, the two SL investment vehicles have different portfolios whose performance will differ by more than 0.1% a year anyway. And depending on your provider you may have different costs to buy, sell and hold funds vs ITs. So, it's not purely a 'fund running costs' consideration even after taking into account the pros and cons of the IT corporate structure bs PAIF.
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