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Property more complex than securities or bricks and mortar

A property allocation should not be a straight shoot-out between real estate securities and bricks and mortar though any combination of the two still needs to consider their differences in liquidity and similarities in correlation.

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So says Tom Walker, co-head head of global property securities at Schroders, who is not only a qualified chartered surveyor used to valuing buildings but also a stock-picking real estate securities fund manager used to valuing companies.

He suggests that what investors need to get to grips with whatever their property exposure is that the underlying asset in an unlisted property fund and a real estate securities fund is the same.

Moving one stage on from asset allocation, this will help investors understand the balance of their ultimate investment into one or the other, or a combination of the two given, as he says: “If you allocate all your exposure to an unlisted property fund, if everyone tries to get their money out of that fund at the same time, the underlying asset is not liquid.”

An investment into each buys a degree of correlation and illiquidity – how much of each depends on your client.

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