Which UK Property PAIF

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

ivormonee wrote: »

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

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.

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?

Linton

Economic wrote: »

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

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

Linton wrote: »

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.

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

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

chockydavid1983 wrote: »

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

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.

chockydavid1983 wrote: »

Also, what controls if you can buy in, how much and at what price? Do you have to wait for someone to sell?

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.

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

bowlhead99

chockydavid1983 wrote: »

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

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.

chockydavid1983

Thanks Bowlhead. The OCF was what I was looking for ideally but I'm struggling to find it for the property investment trusts whereas I can easily find it for the PAIFs :-/.