New Star Suspends Dealing on Intl. Property Fund

Ian_W

Haven't picked THIS up anywhere else and it doesn't show up on a forum search.

Fortunately I decided to sell out of this fund a couple of months ago when the Global R word was first being banded about. At the time the fund was still just in positive territory but is now down circa 10%. I think it was on HLs wealth 150 at one time too.

It does, as the article says, make you wonder whether illiquid B&M property sits well in the OEIC/UT format?

jon3001

Property funds don't seem to get discussed very much on this forum. I've shunned them myself in recent years because I think as an asset class they were overvalued and yields were poor.

However I am interested in diversifying my portfolio into asset classes and will probably look at them again in a couple of years. Do you have any criteria when you expect to get back involved (e.g. a particular minimum yield)?

RayWolfe

New Star seem to be having problems with a lot of their funds. Seems the Stars only twinkled weakly and are now being put out.

earlgrey_3

Ian_W wrote: »

I think it was on HLs wealth 150 at one time too.

Always a worrying sign.

I tend to wonder about the funds they decide to push. Does any one know what the financial arrangements might be for them apart from the normal commissions?

Can't help suspect New Star is into a downward spiral and will find it difficult to attract new star managers for their funds.

Ian_W

For anyone still invested here's an "interesting" Q&A BULLETIN from New Star. Bottom line is large withdrawals - which should be covered by a 30% cash element - but to maximise returns on cash a large % is invested in another fund that requires 3 months notice to withdraw! Worryingly for retail investors ISA rules require eligible funds to allow dealing at least every 28 days though discussions are ongoing with HMRC.

jon3001 wrote: »

Property funds don't seem to get discussed very much on this forum. I've shunned them myself in recent years because I think as an asset class they were overvalued and yields were poor.
However I am interested in diversifying my portfolio into asset classes and will probably look at them again in a couple of years. Do you have any criteria when you expect to get back involved (e.g. a particular minimum yield)?

Jon, property funds were discussed quite a lot about 12 months ago when a few UK ones were suffering heavy redemptions and had to restrict access though not IIRC correctly to retail investors. A couple of examples HERE and HERE.
I'm no expert on them [or any investment for that matter!] but I wouldn't personally consider yeild in isolation unless income was the prime motivation. NORWICH PF has a reasonable yeild [to to-day's base rate, at least] of 6% but has lost about 30% of its value over 2 yrs. I had the same motivation as you diversification, and with property as far flung as Germany, Japan, Australia plus a large cash element it should give that. I just became concerned that a global recession could impact badly on commercial property - diversification being a means to an end, rather than an end in itself - and that open ended funds may not be the best way to invest in property.

Always a worrying sign.

Erm, maybe tad harsh but - QUITE!
But probably not enough of a reason to dismiss a fund entirely though?

jon3001

Ian_W wrote: »

Jon, property funds were discussed quite a lot about 12 months ago when a few UK ones were suffering heavy redemptions and had to restrict access though not IIRC correctly to retail investors. A couple of examples HERE and HERE.

Well - if started threads myself asking what people look for in their choice of property fund (e.g. yield) and if they're not involved right now then under what conditions they would. I didn't really get much response.

Ian_W wrote: »

I'm no expert on them [or any investment for that matter!] but I wouldn't personally consider yeild in isolation unless income was the prime motivation. NORWICH PF has a reasonable yeild [to to-day's base rate, at least] of 6% but has lost about 30% of its value over 2 yrs. I had the same motivation as you diversification, and with property as far flung as Germany, Japan, Australia plus a large cash element it should give that. I just became concerned that a global recession could impact badly on commercial property - diversification being a means to an end, rather than an end in itself - and that open ended funds may not be the best way to invest in property.

In the few responses I did get, they also said there's more to consider than yield. But when pressed on what that is I didn't get any replies. So feel free to expand in reply here! I genuinely want to know what I should be looking for.

Yield can be a measure of the business. My knowledge of commerical property funds is limited so feel free to correct any assumptions. But I'd expect that they're either purchasing properties with credit (subject to interest) or with investors' funds (who expect a return above savings interest rates). So the net yield should be above such interest rates to justify the viability of the investment. The Norwich PF fund increased yield is probably a direct result of falling prices. I'd like to see the income maintained in 12 months time (rather than dropping during the recession) before getting involved.

If the investments are involved in capital projects (e.g. buying land and developing on it) then yes - yield wouldn't be the overriding factor. But if it's acquiring existing units to let then strong cashflow (reflected in the yield) rather than capital gains would definitely be something I'd be looking for.

Other things I'd be looking for (not related to return, but risk) would be a good spread in terms of geography and industry sector.

jon3001

jon3001 wrote: »

Well - if started threads myself asking what people look for in their choice of property fund (e.g. yield) and if they're not involved right now then under what conditions they would. I didn't really get much response.

It looks Like dejà vu all over again! C'mon - there must be some bystanders on the property funds that know when they're going to take the plunge!?

Ian_W

jon,
I hesitated to come back myself and if the questions were aimed at me you obviously missed the health warning:

I'm no expert on them [or any investment for that matter!] but ...

However this CITYWIRE article caught my eye and I thought might interest you. It doesn't answer your questions but does pose a few others.

If nothing else you got another bump!!

sdooley

One advantage of closed-ended funds (e.g. investment trusts) is that generally trading in the shares continues (at depressed levels) even if the underlying assets cannot easily be sold by the company. This is the quid pro quo for the often-stated advantage of unit trusts and OEICS, that redemptions (sales) can be made at net asset value (right up until they can't).

The disadvantage is that ITs can employ gearing so shareholders could be wiped out by lenders in a disaster scenario.