BMO European Real Estate Securities

This fund provides access to a portfolio of real estate securities listed in the UK and Europe. The team is one of the bigger players in this space and runs several other similar mandates. Consequently, it has one of the best resourced and most experienced teams.

Previously F&C Real Estate Securities

Our opinion

The size and strength of the team differentiate the BMO European Real Estate Securities fund from some of its competitors. Also, the unique way the managers use the full range of tools available to them, namely by shorting unfavoured stocks, enables them to express a wider range of views and better manage risk. This is a big positive given the small size of their investment universe. Put into practice, this translates into favourable risk/ return characteristics.

Fund manager

Marcus Phayre-Mudge has been involved in property investment since 1992 and has had considerable success. He has also run the TR Property Investment Trust since 2004 and is manager of the BMO European Real Estate Securities fund. Alban Lhonneur's career in property started in 2006, and prior to joining F&C (which was later bought by and rebranded BMO), he worked at Citigroup and Societe Generale.

We see real estate as an income stream with a capital kicker.

Marcus Phayre-MudgeFund manager

Investment process

The investable universe is split into 16 subsectors, with the managers forming a macroeconomic view as to which sectors to over or underweight. Individual stocks are then subjected to fundamental analysis. Every stock they cover is given an expected and required return. Riskier stocks have higher return requirements. Stocks that they believe can outperform the benchmark and their required return are overweighted. However, as this is a tight universe with only 85 stocks in the index, the managers use the full range of tools available to them to express their views and control risk. This means they will often equal weight stocks on which they have no view and underweight or short stocks on which they have a negative view.

Risk

This fund invests in listed property securities. Over short time periods, these types of companies are highly correlated to the wider equity market. However, over longer time periods, they are more correlated to the underlying properties.

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