Indirect investment market: Jones Lang LaSalle market commentary

UK market overview

The Jones Lang LaSalle Balanced Fund Index continued to fall in April following February and March’s decreases, losing a further 0.11%, writes Ashley Marks. Previously, the index had been positive since July 2009, flattening towards the end of 2011. The index is positive by just 1.42% over the past 12 months; or 1.35% when secondary market pricing is included.

There have been some relatively large movements in secondary market pricing  within the sector funds. The retail warehouse and office sectors fell more than 1% in April, but the industrial sector rose 0.8% as investors continued to seek funds offering attractive and secure distributions.

Balanced funds

Balanced fund pricing increased marginally in April, from just 0.07% to 0.14% above net asset value. Within the index, funds have broadly not strayed far from NAV.

Exceptions include Lothbury PUT and Hermes PUT, where pricing is above 2% premiums. Despite not having transacted recently, RREEF Core is being quoted at around a 10% discount to NAV. However, the majority of funds transact at a small NAV discount, while Henderson UKPF, UBS Triton and SEPUT are trading at around bid price.

Retail funds

Shopping centre fund pricing fell 0.5% from March’s levels, but there were some big movements in the sector this month.

Standard Life remains at the smallest NAV discount, of around 2% to 4%, driven by its supply constraints and core portfolio. Pricing for the Henderson Shopping Centre Fund  has fallen, with trades and investor appetite  at around -7% to -8% NAV discounts, but a   recent £44m transaction is likely to negatively skew this picture.

Lend Lease Retail Partnership’s NAV discount has improved from around 7.5% to 6.5%, while The Mall remains at around a 30% discount to NAV.

Retail warehouse pricing continues to fall, with concerns lingering over long-term rental and capital growth. Pricing is down by more than 1%, driven largely by pricing falls for Henderson’s fund and Hercules Unit Trust, which are now available at around -8% and -10% respectively.

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Industrial and office funds

Due to its prime nature and most of its investors being content to hold, demand  for SWIP AIPUT remains strong, forcing discounts closer to NAV, at around 4%.  L&G IPIF continues to trade at around a 6% discount. Funds with high leverage remain at  more than 20% discounts to NAV, including Ashtenne and The Industrial Trust.

Office sector pricing fell further this month, with WELPUT now priced at around -8% and Henderson CLOF around -1.5% discount to NAV, after a few investors expressed a desire to reduce their exposure. A handful of sellers of UBS CLOVA have also surfaced, with units available at small NAV discounts.

Other funds

There is still relatively strong demand for Unite Student Accommodation Fund, with transactions occurring at a small discount to NAV. A handful of investors are seeking to reduce their exposure to Quercus Healthcare Fund at close to a discount of 10%. L&G Leisure Fund remains sought after, with pricing at a small discount to NAV.