REIT investing and the importance of management structure

REITs can be excellent investments for income-seekers but their management structure should be a key part of investors' due diligence.

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A sophisticated retail investor will have their own due diligence process when selecting real estate investment trusts (REITs) for their portfolio or ISA. REITs can prove excellent investments for income-seekers, as they tend to offer good yields that exceed those from bonds and other equities. Yet this investment universe – there are 118 REITs listed in the UK alone – comes with its own research challenges and nuances. 

It is not just the outlook for a given sub-sector that is important, but how a particular REIT’s strategy, asset allocation and leverage levels will reflect that opportunity via performance. An important factor that could be overlooked during due diligence is the structure of a REIT’s management team and, even more specifically, how its managers are remunerated. Ultimately, this is about the alignment of interest between shareholders and the person or people running the money.

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Marcus Phayre-Mudge
Contributor

Marcus Phayre-Mudge is fund manager at TR Property Investment Trust. He joined the Management team for the company at Henderson Global Investors in 1997, initially managing the direct property portfolio and latterly focusing on real estate equities, managing a number of real estate equity funds in addition to activities in the trust. Marcus moved to Thames River Capital in 2004 (now part of Columbia Threadneedle Investments) and he is also fund manager of CT Property Growth & Income Fund. 

His early career was spent as an investment surveyor at Knight Frank (1990) where he was made an Associate Partner in the fund management division (1995). He qualified as a Chartered Surveyor in 1992 and has a BSc (Hons) in Land Management from Reading University.

About TR Property Investment Trust

TR Property was set up as an investment trust in 1905 and has focused solely on the property sector since 1984. It offers diverse exposure to the UK and European property market, primarily through real estate equities, seeking long-term capital growth and a growing dividend.

TR Property’s core management team has worked together for more than 20 years, led by fund manager Marcus Phayre-Mudge. The trust has beaten its benchmark (FTSE EPRA Nareit Developed Europe Capped Net Total Return £) by 68 per cent over the last decade (to 28 February 2023).