Indirect investment market: Jones Lang LaSalle market commentary

UK market overview

Last month the Jones Lang LaSalle Balanced Fund Index continued a downward trend that began in February, losing 0.17%, writes Ashley Marks. The index has risen just 0.73% over the past 12 months and is down 0.38% when secondary market pricing is considered, on account of sharp rises in balanced fund pricing in May and June 2011.

Secondary market pricing is stabilising, but there have been falls in all sectors, with the industrial sector worst hit, down 0.9%.  Balanced funds fell the least, by just 0.07%.

Balanced funds

Pricing stands at an average 0.07% premium to net asset value and has hovered around NAV for the past six months. Hermes PUT and Lothbury PUT are the only funds with a premium above 2%. Uncertainty about RREEF UK Core Fund’s future led vendors to consider selling at 10-20% NAV discounts, with buyers paying between -20% and -25%. Most other frequently traded balanced funds are trading at between NAV and bid price.

Retail funds

Shopping centre fund pricing fell 0.33% on average compared to April prices, with few  movements last month. Standard Life still has the smallest NAV discount relative to its peers, mainly due to its core assets and lack of gearing. But pricing has fallen slightly, with vendors willing to trade at NAV -3.5%.

Henderson’s Shopping Centre Fund fell again, with deals at close to an 8% discount. Pricing for Lend Lease Retail Partnership and The Mall is stable, at discounts to NAV of around 6.5% and 30% respectively.

Retail warehouse pricing fell 0.42% on average in May. Pricing for Standard Life’s fund and Hercules Unit Trust fell by  around 0.5%, to around -5.5% and -10.5% respectively, while Henderson’s fund is  now trading at around -8.5%.

Industrial and office funds

Pricing remained stable in May, apart from for RREEF’s fund, which fell in price due to uncertainty about the parent core fund and management. AIPUT is still the fund most  in demand, with buyers willing to trade at around 4-5% discounts to NAV, but vendors seeking pricing closer to NAV. Highly geared funds including Ashtenne’s and The Industrial Trust trade at 20%-plus discounts to NAV.

JLL 1

JLL 2

Office fund pricing fell further in May. WelPUT was static, at around -8%, but Henderson CLOF fell 1.5% and now trades  at around a 3% discount to NAV. Little activity is expected in this fund as it approaches maturity. Regional office vehicles continue  to remain absent from the secondary market.

Other funds

Unite Student Accommodation Fund remains sought after, with a few buyers at small NAV discounts. Quercus Healthcare Fund vendors are seeking around a 10% discount, while investors are keen to buy into L&G Leisure Fund at small discounts to NAV.

Investors’ eyes turn to US

With Europe experiencing great uncertainty,  interest in the US market is increasing, with several UK and Continental European investors focusing particularly on core, open- ended, balanced funds. Some see the US as a safe haven; others as a destination in the flight to quality.

However, with long primary market subscription queues and secondary market pricing often at premiums, gaining exposure to the sector will be challenging.

 

 

 

 

SHARE