Standard Life Investments Property Income Trust
Edison | May 23, 2017 06:32AM ET
Standard Life (LON:SL) Investments Property Income Trust (SLI) aims to generate both income and capital growth from investing directly in UK commercial property. Its emphasis continues to be on generating above-average income for shareholders and it currently yields 5.4%. In FY16, the dividend was 117% covered by earnings and the manager, Jason Baggaley, is reasonably sanguine about future dividend prospects.
Relative performance is measured against the quarterly version of the IPD Monthly Index Funds, which is representative of UK direct property funds. SLI has outperformed this benchmark, in NAV total return terms, over one, three and five years.
Investment strategy: Minimise risk, optimise income
The portfolio is invested in direct holdings within the three main commercial property sectors of retail, office and industrial. Yield compression in certain hotspots and stagnant demand for poor secondary and tertiary locations mean that the manager seeks to avoid yield traps and low-yielding ‘fashionable’ assets with high downside risk. For example, yields have compressed so severely in City of London office space that SLI no longer has any exposure there. Instead, the focus is on finding undiscovered early cyclical plays in good locations, where there is reversionary yield and asset management upside potential.
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