Indirect investment market – May 2013

Jones Lang LaSalle market commentary

UK Market Overview

This month, the Jones Lang LaSalle Balanced Fund Index rose marginally, by just 0.09%, resulting in a 12-month return of -3.68%, writes Ashley Marks. This figure falls to -4.10% when secondary market pricing is included over the same period.

Balanced funds

There was a second month of significant improvement in secondary market pricing for balanced funds in April, of 1.14% over March’s pricing. The biggest contributor to this was UBS Triton, where the uncertainty over the past 12 months had seen discounts of around 20% at one point, amid rumours of an unmanageable redemption queue. But sentiment has improved following the announcement of an imminent solution, moving discounts to low single digits.

Pricing for Threadneedle PUT (TPUT) also improved significantly, with a lack of motivated vendors and a select group of buyers now willing to transact at net asset value +1.5%. Most other balanced funds remained relatively stable in April, generally lying between bid and offer price.

Retail funds

Pricing remained largely unchanged across the retail sector in April with no overall movement across the shopping centre subsector and only moderate changes in retail warehouse funds. The most frequently transacted shopping centre funds, namely Henderson, Standard Life and the LendIndirect  investment market Lease Retail Partnership, are still priced at between a 6% and 8% discount to NAV.

Hercules saw the largest shift in pricing of the retail warehouse funds, improving by 1.5% to a discount of around 9% to NAV. Henderson’s retail warehouse fund is now priced at a similar level, with the Standard Life Retail Park Fund remaining at 7% or 8% discount to NAV.

Industrial funds

Industrial sector pricing was also relatively static over April with a movement only really seen in Legal & General’s IPIF, where pricing moved in to a discount of around 4% to NAV. This movement is in line with the general improvement in pricing for the fund during Q1 following the anticipated increased distributions and details of the fund’s extension emerging. SWIP AIPUT remained at a small discount to NAV ahead of the fund’s extension and Ashtenne remained at about 50% discount to NAV.

Office funds

The office sector saw a small improvement in pricing in April, with Henderson’s Central London Office Fund moving in to a 4% discount to NAV, likely to be driven by improving sentiment ahead of the release of the fund manager’s extension proposals in addition to the buoyant direct market. WELPUT transacted at a NAV of -3%, although other vendors are currently priced between a 2% and 3% discount to NAV. Looking forward, it is thought that WELPUT could potentially trade at a premium to NAV as the 2014 liquidity window draws closer but we expect pricing to remain muted for HCLOF until the proposed fund life extension is confirmed.

Other funds

Unite UK Student Accommodation Fund remains at a low single digit discount to NAV, although there appears to be a number of vendors at this level, a very different position from around six months ago, when the fund was transacting at a premium to NAV. L&G’s Leisure Fund remains just below a 2% premium to NAV.