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The Gravis UK Listed Property Fund, launched in October 2019 and primarily invests from a universe of London Stock Exchange listed Real Estate Investment Trusts, or REITs. REITs are more specialist in focus and benefit from daily liquidity. The REITs held in the fund own property that fall within the four key trends identified at the Fund’s inception, namely urbanisation, digitalisation, generation rent, and ageing population. The Fund was launched in response to liquidity issues encountered in direct UK physical property funds and provides exposure to the asset class via real estate-like returns with daily liquidity.
RSMR rate the Gravis UK Listed Property Fund as the Fund benefits from the oversight of a knowledgeable and experienced team applying a proprietary process. This process builds upon the external value as assessment of assets. Five key themes within the real estate sector have been identified for investment, of which the Fund invests in four, namely urbanisation, digitalisation, generation rent, and ageing population. The fifth theme of changing consumer behaviour is avoided due to the exposure to retail, an area Gravis as being severely challenged. This results in a starting universe of circa 80 listed companies which is screened to exclude retail. The universe is further screened for liquidity and trade sustainability. Discretionary investment decisions are then applied to the remaining companies to determine which go into the final portfolio, the most important of which is an attractive valuation. This is where the experience of the management team assisting understanding how external values assess assets and forms the key proprietary piece of the process. Due to the underlying listed exposure, it is anticipated that the Fund will deliver higher degrees of volatility than physical bricks and mortar exposed peers. However, the Fund should demonstrate lower volatility than the broader equity market over the medium to long term as asset valuations are typically based upon stable cash flows from the underlying property exposure. The Fund can be used to provide exposure to the UK property sector instead of a physical bricks and mortar Fund. The Fund can also be used in conjunction with more global-focused listed property funds in the sector to enhance diversification as these funds tend to demonstrate a bias to North America.
The Gravis UK Listed Property Fund is an interesting proposition and does provide an alternative UK-focused option within the sector. The management team are from differing property backgrounds, and this provides a complementary blend in terms of experience of the property sector.
The Fund provides an alternative for investors who have concerns surrounding the liquidity of more traditional physical bricks and mortar UK property funds. However, the increased liquidity that this Fund provides also results in typically higher volatility, and this will need to be factored into any investment decision. Higher bond yields lead to fixed income becoming a contender for capital allocation, especially versus property. However, the focus of the Fund is on income growth, not fixed income. This is reflected in the number of underlying holdings that have grown their dividend over the medium to long term.