In this video update, Ainslie McLennan, Co-Manager of the Janus Henderson UK Property PAIF, examines fund and UK commercial property market performance year to date. Ainslie also discusses portfolio positioning and her outlook for the asset class.

Key takeaways:

  • Income is expected to be the key driver of returns, with asset management activity providing potential opportunities for growth

  • Investment volumes in the UK commercial property market continue to be buoyant, albeit reduced in comparison to the same period last year

  • The retail sector, where the fund is underweight, continues to experience a structural shift from traditional areas of the market to online shopping, creating new opportunities within industrials and logistics 

Performance mentioned in this video is for the ‘I’ accumulation share class. Source: Morningstar, from 31.12.18 to 30.06.19, bid-to-bid pricing basis, net of fees, gross income reinvested, in sterling terms, other share classes are available (see tables below).

Year-to-date performance

  6-month return to 30.06.19
Janus Henderson UK Property PAIF A Acc 1.4%
Janus Henderson UK Property PAIF I Acc 1.7%
Janus Henderson UK Property PAIF Feeder Fund A Acc 1.4%
Janus Henderson UK Property PAIF Feeder Fund I Acc 1.7%
IA UK Direct Property Sector peer group average 0.3%

Source: Morningstar as at 30 June 2019. PAIF & Feeder Fund returns, accumulation share class, bid to bid pricing basis, net of fees, in sterling terms. Peer group comparator is the IA UK Direct Property Sector average return. Performance data may change due to final dividend information being received after quarter end.

Discrete year performance

  June 2014 to June 2015 June 2015 to June 2016 June 2016 to June 2017 June 2017 to June 2018 June 2018 to June 2019
Janus Henderson UK Property PAIF A Acc 10.9% -3.8% 5.7% 7.4% 2.4%
Janus Henderson UK Property PAIF I Acc 11.6% -3.1% 6.4% 8.1% 3.0%
Janus Henderson UK Property PAIF Feeder Fund A Acc 10.9% -3.8% 5.7% 7.4% 2.4%
Janus Henderson UK Property PAIF Feeder Fund I Acc 11.6% -3.1% 6.4% 8.1% 3.0%
IA UK Direct Property Sector peer group average 10.1% -0.7% 5.3% 6.5% 0.8%

Source: Morningstar as at 30 June 2019. PAIF & Feeder Fund returns, accumulation share class, bid to bid pricing basis, net of fees, in sterling terms. Peer group comparator is the IA UK Direct Property Sector average return. Performance data may change due to final dividend information being received after quarter end.
The Investment Association (IA) groups funds with similar geographic and/or investment remit into sectors. The fund's ranking within the sector (as calculated by a number of data providers) can be a useful performance comparison against other funds with similar aims.

Glossary

Alternatives sector – includes assets such as cinemas, gyms, hotels, food outlets, restaurants and care homes.
Asset management – can include refurbishment work to improve valuations and attract a better quality of tenant, changing the planning use of assets to increase rental revenue, or renegotiating existing leases to extend tenancies.
Average lease length – the average time to expiry of leases across a multi-let asset or a portfolio. It is weighted by rental income and assumes that all tenant break clauses will be exercised.
Commercial property – any property asset used for commercial purposes. The asset class is broken down into three main sectors: retail, office and industrial. There is also the growing alternatives sector.
Core assets – the managers define core assets as being top class in at least three of the following five criteria: location, quality of tenant, lease duration, lease structure, and building specification.
Liquidity – The ability to buy or sell a particular asset in the market. Assets that can be easily traded in the market (without causing a major price move) are referred to as ‘liquid’. Liquidity can also relate to having funds readily available to cover property purchase costs and for the purposes of supporting normal transactional flows into and out of a fund by investors.
RPI/CPI-linked leases – periodic increases in rent based on the retail prices index / consumer prices index measure of inflation.
Void or vacancy rate – the proportion, usually expressed as a percentage, of a property or property portfolio that is without a tenant. Individual properties with higher vacancy rates can be less attractive to investors looking for stable long-term income, but may be more attractive for asset managers looking to add value through asset management activity.
Yield – A measure of the percentage of income return you receive from a property investment. This is calculated as the gross annual rent generated by a property, divided by its current valuatio