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Neuberger Berman’s Tiltman warns on bricks and mortar risk

Neuberger Berman’s Tiltman warns on bricks and mortar risk

Gillian Tiltman, co-manager of the Neuberger Berman Global Real Estate Securities fund, has warned investors about the dangers of using property as a proxy for bonds.

Property funds have seen strong inflows this year with the sector the best seller in February. However, Tiltman (pictured), who joined from M&G late last year, is also concerned some investors do not understand the liquidity risk of holding direct property.

‘Real estate securities are not bond proxies and that is one of the biggest misunderstandings about this asset class,’ she said.

‘Where we are similar to bonds is that we attract the same types of investors as fixed income. The correlation to fixed income is very low.’ She said she prefers to manage real estate securities as the strategy offers property exposure but with liquidity risks mitigated.

Mitigating liquidity risk

‘Liquidity risk does not exist for us. What we offer is bricks and mortar with liquidity. We are buying stocks and we can sell these easily,’ she said. ‘This is a big problem I have with UK bricks and mortar funds. Why would you buy bricks and mortar when you can get that with liquidity via real estate securities?’

Tiltman formerly ran the M&G Global Real Estate Securities fund, which sat alongside the group’s £4 billion M&G Property Portfolio fund.

Her old fund was closed in March 2015 following large outflows, which saw it shrink from £132 million at the time of her departure, to £81 million at the time its closure was announced.

‘Real estate securities are a lot less volatile,’ she said. ‘I’ve spent the last seven years trying to explain this to investors. I understand it, because everyone likes a direct property fund.’

Current real estate opportunities

While she is finding opportunities in the UK, she is not looking beyond London for investments. This is because large, inflexible real estate companies, under pressure from shareholders, view London as their best bet due to the capital’s strong rental growth, she said.

‘The rest of the country is rerating but it is very difficult to access that via listed players. We have seen the rest of the country being decimated over the last five or six years,’ Tiltman said.

‘Most of the companies we own, such as Great Portland Estates and Capital & Counties Properties, are London-focused names.’ 

Central London exposure

She also holds Shaftesbury, which owns a property near London’s Carnaby Street and Chinatown. It houses a number of popular brands that can access lower rents because they are on back streets.

The now-closed M&G Global Real Estate Securities fund, which Tiltman managed since 2010, returned 14.6% over three years up to her departure. The Citywire Global Property Equity sector returned 21.5% in that time.

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Gillian Tiltman
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