Yield-hungry investors look to property

‘It was proved in 2008 that a combination of liquidity and leverage can be toxic,’ he says. ‘Unless we become genuinely convinced of a reacceleration of global economic activity, we are unlikely to soften that stance, particularly as in the UK and Europe, many of the financial situations are yet to address the property issues they collected in the boom years.’

Given PSigma’s longer-term expectations for serious inflation issues, Becket says it is worth exploring property markets that could provide some protection against this, and notes possible opportunities in Germany and Japan.

James Calder, head of research at City Asset Management, also holds no property at present, citing further potential for capital falls.

‘Yields are fairly attractive and the asset class has its diversification benefits but we can get better income from equities or high-yield debt and simply do not feel we are being paid to take property risk at present,’ says Calder.

‘Property is also not a homogenous asset class, ranging from retail, to office, to commercial, and the majority of managers we speak to predict another six to 12 months of capital falls across many areas.

‘We feel there may be better value available by next summer but then the access questions come in, as open and closed-end products both have issues for investors.’