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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) offers exposure to the property market via the equities of companies owning property. As such it has a number of key advantages over investment in a direct property investment trust. Manager Marcus Phayre-Mudge is able to be much more flexible and nimble in his asset allocation, and make medium-term tactical trades as well as longer-term investments. He can also more easily invest in alternative sectors of the property market when they are facing a strong outlook.

Marcus also invests across continental Europe as well as the UK, which means he and his team have multiple levers to pull in search of alpha. He aims to take advantage of national and local business cycles as well as broader secular themes, but his investment decisions are built on rigorous stock-specific work. There is a tilt towards quality, as we discuss in the Portfolio section, which can be important to understanding relative returns.

Over the past five years the trust has performed well versus its benchmark (see the Performance section) and outperformed in NAV and share price terms the average return in the AIC UK Commercial Property sector of direct property trusts. The bias to quality, to small caps and the small allocation to physical property all reduce the beta to the market, but this is more than offset by consistent levels of gearing.

Despite the impact of the pandemic on the revenue account (a c. 24% reduction in FY 2021), the board raised the dividend over the past year and remain committed to doing so again as long as they believe the income will recover in the medium term and they have the reserves to do so – see the Dividend section. This is in contrast to the direct sector, where dividends on the generalist trusts are still mainly below their pre-pandemic levels. TRY trades on a small discount of 4% as of 21/10/2021.

Analyst's View

TRY is a great way to capture the growth and income potential in commercial property without some of the drawbacks of direct property investing. This includes the much longer time taken to buy and sell properties which means positions cannot be easily unwound, and the greater uncertainty of the portfolio value given infrequent, non-market valuations. Marcus can be nimble with his investment decisions and take tactical positions as well as long-term strategic ones which we think has helped him generate alpha over the long run.

The relative solidity of the dividend is another attractive feature. The board was able to use revenue reserves to grow the dividend in FY 2021, and retains a decent reserve for future use. We think the flexibility of Marcus’s remit means the board can have greater confidence in the ability to repair the income account over the short to medium term.

While the market worries about inflation, it is worth remembering that much of TRY’s revenue is index-linked. Marcus’s quality growth strategy should mean his portfolio is more resilient to economic news, even if this cannot offset entirely the economic sensitivity of property. We think the strong performance in income and capital terms through the crisis show the strength of the strategy. However, we note the discount is narrow relative to the five-year average of 5.6% and, in the short-term, the economic sensitivity of the property market could work against the trust if there is a setback to the recovery.

bull bear
More diverse portfolio than its direct property peers and greater tactical flexibility
Lower historic yield than the direct property sector
Strong track record of alpha generation
Property shares more correlated to equities than direct property is over short term
Dividend was raised through the pandemic and the board is committed to growing further if possible
Economic sensitivity of property means it won’t protect in the same way bonds might – although some sectors are more defensive
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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