Henderson: Falling Pound Has Attracted Property Investors

Henderson UK Property reopened its doors to investors this month after suspending trading post-Brexit vote. We talk to the fund manager about the outlook for the sector

Emma Wall 28 October, 2016 | 10:55AM
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Emma Wall: Hello and welcome to the Morningstar Series "Why Should I Invest With You?" I'm Emma Wall and I am joined today by Ainslie McLennan, Manager of the Henderson U.K. Property Fund.

Hi Ainslie.

Ainslie McLennan: Hello.

Wall: So, there's been quite a lot of change in the property sector over the last six months, following the Brexit vote. The fund has now reopened for trading as of October 14th. But you among other property fund manager took the decision post the Brexit vote to suspend trading. Why does a firm make that sort of decision?

McLennan: Well, this is the first time that decision had ever be taken on this fund, it's been on the go since 1999 and it's never suspended before. We were in an exceptional situation where the result of the vote which I think was a huge shock to many caused a run rate that was becoming unhealthy on the funds. And the decision was taken by the Henderson board, with the result of the vote and the other fund suspensions that had taken place to ours that it was appropriate for our fund to suspend trading for a period.

Wall: And across all asset classes a lot has happened since June 24th. Can we just take a quick look at equities. I mean, I think it's been surprise how much the FTSE 100 has rallied and that is due mostly down to sterling devaluing. Does that have a similar effect on property?

McLennan: It has, I mean we are always very forensic at tenant level about how that would affect the businesses and we haven’t heard any follow up from that. From a short term perspective in terms of raising liquidity it has actually brought a number of overseas investors into the market. Many of whom are active any way, but really could see a huge advantage to being very proactive about getting horde of good investment property and over the period that we've been seeing this devalue.

So, that in many ways has helped us drive a competitive edge from people wanting to purchase assets that we have been selling and get deals done quickly, but at very good prices. So yes, it's been a positive in that respect short term for us.

Wall: Looking forward there are still number of uncertainties. I mean Article 50 hasn’t even been triggered, lot of the GDP figures are looking positive, but again its very early days. So, what is your outlook for the sector.

McLennan: I agree with that, completely I think. We haven’t really dealt with Brexit, yet. We've dealt with the result of Brexit. It's quite possible the property faced up to this, at the early stages. So we might have dealt with a lot of this early on prior to Article 50 being invoked but from our own perspective when we are looking at the assets that we've got in the portfolio and the tenant and the tenant profile of those is all about income for us.

So, really trying to be as steady as we can on that income line. Making sure that these tenants are good for the rent which passes straight through to be the dividend, right through what could be a very steady time. But what could be quite a test of time and making sure with an average lease length on the fund still around 10 years after our sales process.

Very low volatility on the funds, that we are good for the money so that that dividend and income stream is there is really, the reason any one would invest in commercial property in the U.K.

Wall: Is it a change of tack because you know that Brexit is coming or is it business as usual?

McLennan: It's pretty much business as usual we are a very income focused fund. We're a very core fund in that regard and that’s been a long term trend on the fund. So that hasn’t changed, so I just want to make sure that these tenants are the right tenants and we've had a very keen eye on that as we've been selling out assets.

We've tried to sell out things where we've crystalized good returns on asset management and performance that we could capture, but also what we were going to have remaining in the fund was very robust in terms of that income stream and that’s been our focus. That should be something that I think is reassuring to people as we go into next year invoking Article 50.

Wall: Ainslie, thank you very much.

McLennan: It’s a pleasure. Thanks.

Wall: This is Emma Wall from Morningstar. Thank you for watching.

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Emma Wall  is former Senior International Editor for Morningstar

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