This trust invests in the shares of property companies of all sizes, typically within Europe and the UK. It will also have a small amount invested in physical property in the UK. Its managers look for well-run businesses in sectors including retail, office, residential, industrial property and alternatives (which includes student accommodation, self-storage and healthcare). The trust has a history dating all the way back to 1905, although it became a real estate specialist vehicle in 1982.
Our opinion
Marcus is a very experienced manager with a strong track record who has the benefit of a well-resourced and dedicated team. The trust’s share price tends to be volatile, but this volatility has been well rewarded by the returns achieved over the long term. Given its focus on property shares, the trust could make an excellent complement to a bricks and mortar portfolio. We do not see any reason why Marcus and his team cannot continue to deliver good long-term returns for shareholders.
Trust manager
The TR Property Investment Trust team is one of the largest pan-European real estate equity teams. They also run a number of other property portfolios and open-ended property equity funds.
Marcus Phayre-Mudge manages this trust and Alban Lhonneur assists as deputy. The pair also run the Elite Rated CT Real Estate Securities fund. Marcus is a qualified chartered surveyor and has a Bachelor of Science (Hons) in Land Management from Reading University. He has been involved in property investment since 1992. Alban’s career in property started in 2006, and his prior roles include equity research at Citigroup Global Markets Société Générale Securities. George Gay has been the direct property fund manager on the portfolio since 2008.
Property is a fairly niche investment, but I like to remove the noise and keep things simple - the world is my investment universe and well-run property businesses are what I seek.
Marcus Phayre-MudgeTrust manager
Investment board
The five-strong board is chaired by David Watson, who has served on the board since 2012. Prior to this role David spent nine years as finance director of M&G Group plc, where he was a director of four equity investment trusts, and more recently at Aviva plc as chief finance officer of Aviva General Insurance. He is currently deputy chairman of Countrywide plc, chairman of Kames Capital plc and a non-executive director of Hermes Fund Managers Limited, where he chairs the Audit Committee.
The other board members are Simon Marrison, Tim Gillbanks, Kate Bolsover and Sarah Jane Curtis. The board meets six times per year and takes an active interest in protecting shareholders and ensuring the manager remains within the trust’s stated investment objective. The company’s year-end is 31 March.
Investment process
Marcus has a structured but pragmatic process. He analyses how economic policies will affect property as an asset and individual property companies. He makes full use of all the members of his team to ensure every investment opportunity receives in-depth attention. Technically, the trust can invest anywhere in the world but, in practice, the focus—and the trust’s benchmark—is a pan-European index. Although the trust primarily buys property shares, the team will also have around 10% of the portfolio in physical property. This is so that they will always have first-hand information about the state of the market, without any third-party influence.
ESG
ESG - Limited This fund focuses primarily on governance, which is a key element in the investment decision-making process. Marcus looks for well-managed businesses, with management teams that have effective oversight of their portfolio of assets. He will avoid poorly run companies, which he believes will result in financial issues in the long-term and prove to be poor investments.
In addition to this, Marcus does supplement the analysis with data from a number of sources, both external (through Global Real Estate Sustainability Benchmark and MSCI) and through the in-house Responsible Investment team. The team is using these sources to build an effective database of ESG data, which it intends to use to develop an ESG filtration system that will be a further complement to the existing process in the coming year.
Risk
As mentioned, the trust invests primarily in property company shares and with only around 10% exposure to physical bricks and mortar. As a result, it is not only exposed to fluctuations in commercial property prices, but also to stock market volatility. However, the manager is highly experienced and his thorough investment process, along with the large number of stocks held (around 75), reduces the risk somewhat.
Gearing
The maximum gearing allowed is 25% of the portfolio value. The board monitors this gearing to ensure it remains within the limits set and continues to be in the interest of shareholders. In the 2019-20 financial year, the board added to its short-term debt facilities with a new relationship and loan facility of £20m with the ICBC and added a further £25m to its facility with RBS.
Share price discount/premium
The share price does tend to trade at a discount to net asset value (NAV). In the last ten years (29 December 2020) the trust has traded between a 30% discount and a 5% premium.
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