Property fund pitfalls
Property funds have overtaken bond funds in retail sales, according to the secretive Pridham report, says Citywire, representing 21% of sales in the first quarter of 2006. And as Darius McDermott, MD of Chelsea Financial Services, states in the FT, the high uptake reflects investors' willingness to diversify their portfolio, "while getting exposure to an asset class that has done very well over the last ten years".
Prospective investors should, therefore, take several steps before buying into property funds. Look closely at charges, minimum investment levels and liquidity restrictions so that you know if there will be any obstacles to getting your money back. You should also look at the investment breakdown of each fund, says Sharlene Goff in the FT, as some focus specifically on bricks and mortar, while others "invest in the shares of property companies and others offer a hybrid."
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Also, look for a fund manager with proven experience. "The weight of money going into the sector could push prices up so it is all about the skill of the manager in selecting the right assets," says McDermott.
RAB really is special
One highly experienced fund manager is Philip Richards. Nearly a year ago, MoneyWeek recommended buying into the commodities story via his RAB Special Situations fund which is listed on Aim as RAB Special Situations Company (RSS). Last year it also issued two warrants, which we also suggested investors should consider (RSSA and RSSB). The A' warrants are due to be exercised next week at 115p. As the shares are now trading at 131p, the warrants have done well in the last eleven months since we recommended them. However, just because they are about to be exercised doesn't mean that you should sell out you ought to be looking at a "two-to-three year investment in the fund", Philip Richards, the fund manager, told MoneyWeek. "We might be in a speculative bubble, but we are still in a secular up-wave." Collins Stewart agrees, "RSSA is currently trading at a 15% discount to the fund's net asset value... We continue to recommend RSSA on the basis of both the manager's impressive track record and the strength of the market for natural resources."
-
The financial crisis in UK universities – what can be done?UK universities are running out of cash and have begun to shed staff; bankruptcies look likely. What’s gone wrong, and what should be done about it?
-
How to pay in a chequeReceiving or writing a cheque has become much less common in recent years as instant bank transfers have grown in popularity. Amid widespread bank branch closures, we explain what to do if you get a cheque, and how you can pay one into your bank account.
