M&G Investments explains its themes at Lausanne Summit

InvestmentEurope’s recent Lausanne Summit saw ten management groups outline their unique investment ideas, including M&G.

Real estate still carries the negative associations of the sub prime debt which was one of the underlying factors behind the global financial crisis in 2008, but there are signs that the sector is being rehabilitated as investors return, drawn by the potential for both income and capital gain.

Gillian Tiltman, portfolio manager of the €100m M&G Global Real Estate Securities Fund, launched just four years ago, noted that surveys suggest investors have at least 5% and up to 15% of their overall investment portfolio in real estate-related assets.

The fund, which invests exclusively in property securities across the world, has just registered for sale across Europe. Listed real estate securities offer the liquidity investors still seek, as well as an income stream and reasonable capital growth, M&G said. Global property cycles are not synchronised, and inter regional correlations are lower for real estate securities.

“Property is a global asset class but a local business, and we what look for is prime real estate – prime today, and prime tomorrow,” said Tiltman. She looks for firms that have identified unique niches, for scarce assets and for what is likely to become the next ‘prime’ asset. “We try to identify the right people, with the right assets, at the right price.”

Her valuation is derived from the company balance sheet, the visibility of cashflow and a view on deviation from intrinsic value.

Tiltman’s portfolio holds 46 stocks, drawn from a universe of 2,500 companies. She uses the Holts screening system, which throws up about 650 companies initially, and then adds in factors like liquidity and corporate governance, to produce a prospective buy list of 40-60 stocks.

“We like to be supportive shareholders, and tend to hold a stock for three to five years, buying 1.5% stake and scaling up to 3% depending on the company. We are agnostic on sectors, but we need a certain level of diversification and we are benchmark-aware, but don’t follow it slavishly.”

The portfolio is invested 70.1% in REITS, 17.6% in property companies and 12.3% in developers.


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