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Fund Profile

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This is a non-independent marketing communication commissioned by Columbia Threadneedle Investments. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
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Overview

TR Property (TRY) invests in the equity of property companies, offering exposure to the growth and income in the property market with far greater liquidity – and therefore flexibility – than a direct property portfolio would offer. The trust is pan-European rather than restricted to the UK, which means that its manager Marcus Phayre-Mudge has a broad opportunity set and can build a highly diversified portfolio. Additionally, commercial rent in Continental Europe is much more commonly index-linked than in the UK, meaning the trust’s revenue and capital values benefit from some protection in an inflationary environment.

Marcus has made full use of the flexibility that investing in equities has afforded him in recent years, which have been highly volatile. As we discuss in the Portfolio section, he has been able to tactically shift in and out of sectors during different phases of the pandemic and after Russia invaded Ukraine. Notably he has been adding to the portfolio in recent weeks and Gearing has ticked up, indicating that he thinks the sell-off in the market has revealed some value.

The index-linked nature of the underlying income (over 60% has some form of inflation linkage) should help support the revenue account in the coming months and years. The trust has paid an uncovered Dividend for the past two years as revenue fell due to the pandemic, but the board and manager remain confident that this cover can be repaired in the near future. TRY has grown its payout in each of the past two financial years, in contrast to the direct property sector where almost all trusts cut their payout due to the pandemic.

Analyst's View

Index-linked income is hard to come by, and in the current environment, with UK and eurozone inflation at multi-decade highs, we think the high level of indexation (over 60%) on TRY’s portfolio is attractive. It is true that the pass-through will not be 100% as contracts typically include step-ups at agreed intervals, plus some of the contracts are indirectly linked (in Germany), but nonetheless this feature should give strong support to the income generated and make it easier for Marcus to generate real income growth. Indexation is also likely to provide support to capital values, even if we do enter a recession.

Over the long run we think the flexibility of the portfolio is a key advantage, and Marcus has a good track record of using it to add value in volatile times. It is striking that Marcus has been adding to his market exposure in recent weeks and gearing has picked up. While he acknowledges the near-term risks, this indicates he thinks there is good value in the market – we note how it compares to the financial crisis period, when Marcus took cash up to nearly 20%. Marcus’s tilt to less indebted companies and his focus on those in sectors with favourable supply-and-demand dynamics should help provide some support in an environment of rising rates and weakening economies.

Bull

  • More diverse portfolio than its direct property peers and greater tactical flexibility
  • Strong track record of alpha generation
  • High level of index-linked income on underlying portfolio

Bear

  • Lower historical yield than the direct property sector
  • Property shares more correlated to equities than direct property is over the short term
  • Most property sectors have some economic sensitivity
Continue to Portfolio
2024 Kepler Income & Growth Rated Fund

This trust has been awarded a rating by Kepler Trust Intelligence for income & growth... Find out more

Fund History

17 Jan 2024 Top of the Pops
We reveal the winners of our investment trust ratings for 2024…
10 Aug 2023 Fund Analysis
TRY: a unique way to capture a recovery in property valuations...
21 Jun 2023 Ça plane pour moi
Some of the world's biggest companies are doing just fine in Europe, yet investors shun the region. Time for a rethink...
11 Jan 2023 Solving the Rubik’s Cube
We reveal the winners of our investment trust ratings for 2023…
08 Dec 2022 Fund Analysis
TRY: global debt re-pricing creates opportunities in pan-European property markets...
07 Dec 2022 What’s that coming over the hill?
Is it a monster, or a debt refinancing anniversary? Our analysis of the property sector shows chunky discounts across the board are there for good reason…
27 Jul 2022 Fund Analysis
TRY’s index-linked revenues could be appealing in the current inflationary environment…
08 Jun 2022 Safe as warehouses
We look into the attractions of the often-overlooked commercial property sector…
05 Jan 2022 Kepler’s top-rated trusts for 2022
We unveil the winners of our ratings for 2022 in the Growth, Income & Growth and Alternative Income categories…
27 Oct 2021 Fund Analysis
TRY has a number of key advantages over a direct physical property trust…
21 Apr 2021 Fund Analysis
TRY offers a diversified and flexible way to invest in property, via listed equities…
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
22 Oct 2020 Fund Analysis
TRY offers a yield of almost 4% backed over 100% by reserves…
20 Nov 2019 Making the grade: Kepler's rated trusts report strong performance in 2019
Earlier this year, we launched our new ratings for income and growth. Since then, the 40 trusts to have been awarded the elite Kepler Trust Intelligence ratings have performed strongly…
18 Oct 2019 Fund Analysis
Specialist property trust, which has consistently outperformed its benchmark…
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