L&G Property Fund PAIF vs L&G Feeder Fund

username12345678

Hi All,

I've been looking at options to increase the property allocation within my SIPP and after a bit of research I think i've sort of got a loose grip on the difference between a PAIF and a Feeder.

My understanding is that given the option between the two then those inside an ISA/SIPP would likely get a better return by investing in the main fund.

Looking at the 2 funds above though it seems the Feeder fund has a better total return over 3, 5 and 10 years with a higher yield.

Do the total return figures on Morningstar not account for the tax benefits (as I understand them) that come with investing in the direct fund?

Thanks

bowlhead99

I can't explain why you are seeing a better return on the feeder than the main PAIF on Morningstar. Essentially the feeder pays corporate tax on its property income received from the main fund and then has fewer pounds of value to distribute or reinvest. Perhaps you accidentally looked at one of the charts assuming dividends reinvested and the other, not. Or some sort of timing difference, which won't endure.

You are right that if you're in a SIPP or ISA and your investment platform supports it, you would be better investing direct to the PAIF where the money is made, cutting out the tax leakage.

In some personal tax situations, paying the tax at feeder level and then getting paid a nice clean corporate dividend from that feeder which fits inside your dividends allowance, could be useful. Or if your platform can't handle the proper streaming of dividends vs property income vs interest. But for a SIPP investor, going straight to the master fund instead of going through the feeder fund, makes sense

londoninvestor

username12345678 wrote: »

Looking at the 2 funds above though it seems the Feeder fund has a better total return over 3, 5 and 10 years with a higher yield.

One thing here - the PAIF fund, and the feeder in its current form, have only existed since 2014. So the 5 and 10 year performance figures must rely on using some proxy for the performance before that. If (not unlikely) that's the same proxy for both funds, then the 5-year and 10-year performance figures really just give the same information that inception-to-date performance would.

dunstonh

I have just done like for like comparison using Financial Express Analytics (think Trustnet on steroids in terms of data). The feeder funds are slightly underperforming as you would expect. Although not by much.

Perhaps your morningstar snapshots were not on the same basis.

username12345678

Thanks for the replies.

username12345678

The fund looks interesting but the spread is a little off-putting.

dunstonh

username12345678 wrote: »

The fund looks interesting but the spread is a little off-putting.

It shouldnt be that offputting if you are holding it for the recommended period of time. Its cheaper annually than most property funds. So, there is a breakeven point.