Last Word
Perspective
ARTICLE
01
Fund Manager
VIDEO
02
Square Mile
03
Fund Buyer
REACTIONS
04
strategy directly from the fund managers themselves.
K
research and market views together with an explanation of the
Kames Property Income is a bricks-and-mortar real estate fund that has providing income and liquidity as key themes. It stands out from its peers and delivers them both by investing in significantly smaller lot sizes and avoiding the rush for ‘trophy assets’ in London.
Axis analyses the fund from four perspectives to bring you insight,
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Review By Gary Corcoran
COMPANY_ Last Word
Kames Property Income is different from most other property funds, particularly other bricks-and-mortar funds. To start with, it emphasises the generation of income in its investment strategy - and in its product title - with the aim being to distribute around 5.5%pa on a monthly basis. It has a historic yield of 5.05%.
Scroll down to read more...
“The smaller lot sizes Kames Property Income invests in makes it a big fish in the buyers’ pond and the fund is able to negotiate preferential pricing as a result.”
JOB TITLE_ Director
YEARS IN INDUSTRY_ 25+
LOCATION_ London
G
at Last Word
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GARY CO_
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GARY CORCO_
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GARY CORCORAN_
GARY CORCORAN
that pays out a monthly
income distribution
A bricks and mortar fund
To view Square Mile Investment Consulting and Research Ltd's disclosure on their involvement on this site, please click here.
COMPANY_ Square Mile Investment
JOB TITLE_ Head of Research
J
“The smaller lot sizes and the team’s focus means the fund could be a useful diversifier for income-hungry investors.”
Kames Property Income has a focus on generating a regular income stream, aiming for a yield of about 5.5% pa over the market cycle, with a monthly distribution. The fund tends to have exposure to smaller properties than many of its competitors, with an average lot size of £5-20m. This, combined with the focus on income, means that the fund may behave quite differently to both the IPD index and many of its competitors, and could be a useful diversifier for income-hungry investors.
Scroll down to read more...
YEARS IN INDUSTRY_ 22+
JA_
JAS_
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JASON_
JASON B_
JASON BR_
JASON BRO_
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JASON BROOM_
JASON BROOME_
JASON BROOMER_
JASON BROOMER
Last Word
Perspective
The £529m fund is run by a team headed by co-managers David Wise and Richard Peacock. Wise, who is also head of the direct property investment team, joined Kames Capital in 2007 and Peacock following him from Aviva Investors where the two previously worked together, in December 2016.
One distinguishing feature of the fund is where the managers invest. They prefer the smaller end of the property market, looking at lot sizes in the range of £5m-£20m.
As a buyer, they are not often competing against other property funds when looking to make an investment. Instead they tend to find themselves up against property companies, family offices and high net worth private investors. The benefits that Kames Capital can give the sellers is their size, scale and expertise offering less transactional risk because, as Wise says, they are a “desirable purchaser”.
Currently, the fund invests in around 48 properties - although as it raises assets and has cash to invest the number of properties will increase - that are diversified throughout the UK. It has a very definite focus in the regions and away from London and this diversification is another feature that distinguishes it from other more mainstream propositions, investing in what the team sees as less volatile, more boring parts of the market. They are most definitely not about buying trophy assets; they are most definitely about generating steady income returns that they tend to get from smaller assets in the regions rather than vanity projects based in London.
Their investment process is fundamentally about generating value and the search for yield which they say they find more effectively the further away they are from London and the Southeast.
Their largest exposure is in the office sector where they have a great deal of expertise and knowledge. Possibly the most significant area of difference with most of their competitors is that they hold around 50% of the fund in active value or good secondary property. These are typically higher-yielding assets valued at £5m-£20m, delivering a yield of 7% or more. Around 30% of the fund is held in core assets, with the other 20% in liquidity assets including cash and Reits.
This combination means the team is well placed to continue providing income and the potential for capital growth in an attractive, long-term proposition.
The benefits of operating in a pool of smaller properties as both a buyer and seller
AUTHOR_ GARY CORCORAN
These smaller lot sizes also make them more nimble when, as with the middle of 2016 in the weeks following the UK EU referendum vote, they become a seller. The extent to which the multi-billion-pound property funds reacted by suspending trading, effectively shutting their doors and locking investors in, was arguably an over-reaction and largely unnecessary.
This was not the case for investors in Kames Property Income because how and where it invests, as well as the skill and experience of its management team, meant it was far better prepared than others come the reaction to 23 June, 2016.
It means that where they needed to, they had a greater choice of what they sold and were able to go to a larger-in-number and more diverse set of buyers of properties in the bracket they operate in. Added to their double-digit cash holdings, this gives Kames Property Income a great deal of underlying liquidity which complements the diversification it provides as part of a multi-asset portfolio.
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Kames Global Diversified Income Fund
Fund
Vincent McEntegart has been managing the Kames Global Diversified Income Fund for six years and is well-versed to the changeable financial climate. Curabitur blandit tempus porttitor. Aenean lacinia bibendum nulla sed consectetur.
Manager
Vincent McEntegart
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This feature of playing in a slightly different area of the market was of huge benefit to the fund over the summer when this was one of the few not to close following the Brexit referendum. The managers had raised cash levels going into the vote, but the fund was also helped by being in smaller, secondary properties which were easier to sell than the big flagship prime assets which some of the bigger funds held, the likes of which were generally not held by the other funds in this space.
Since launch the fund has produced a relatively high and stable income stream of 0.4 to 0.6 pence per share each month. In total-return terms the fund has fared relatively well and is currently in line with the IPD index on a rolling one-year basis, which is no mean feat given the costs of investing in physical property and the cash drag which funds such as this must inevitably suffer.
AUTHOR_ JASON BROOMER
“Despite the fact that many investors buy commercial property, at least in part for its income-generating characteristics, this fund is unusual in its explicit goal of targeting a high yield which it pays out monthly. While the fund only has a relatively short history, the team at Kames Capital have been running money in this style for far longer, and the fund could prove very interesting both for clients who would benefit from the monthly income payments and for those who simply wish to diversify their property holdings.”
The first group of properties, which require active management, is where the managers feel they can really add value for investors and they are proactive in improving these properties, largely through refurbishment programmes. Taking on such work means that the improved properties will command higher rental values, and often better lease terms than they did before the work.
Another feature of this fund is its wide geographical exposure, with a much lower weighting to London and the Southeast than the IPD index. This means that the fund could perform slightly differently to the index and potentially provide investors with diversification against their other property holdings.
This is one of the few retail commercial property funds to invest in properties with smaller lot sizes, another differentiating factor versus many of the its competitors. It is unusual for this fund to be competing with others in the space over the purchase of any property, instead their main competitors are likely to be wealthy individuals, family offices and so on.
Kames Property Income is managed by an experienced team of investors, the core of which, in different guises and at different houses, has worked together for many years and is co-managed by David Wise and Richard Peacock.
This fund, as the name would suggest, is run with the aim of generating a steady and reliable income stream for investors. To produce a relatively high level of income, the managers of the fund focus their efforts on slightly smaller properties than many of their competitors, with the average property size being £5-20m. This is balanced by a core of marginally larger properties which are around £15m in size that produce slightly lower levels of income and are of higher quality and more stable than the higher-yielding properties.
The fund is balanced between properties which require active management in the form of refurbishment, re-letting etc. and which therefore can be acquired at high yields (often north of 8%) and more stable, prime properties which trade at yields of around 5.5-6.5%. There will also be a balance of the portfolio held in Reits and cash for liquidity purposes, usually around 20%.
An experienced property team hunting in areas that others tend to avoid
John Monaghan, senior investment research analyst, Square Mile
Square Mile
Perspective
Fund buyers' perspective
Diversification for property exposure and a regular monthly income in a bricks and mortar proposition.
Market Reaction
Next
Ian Walsh_ director_ Michael Ambrose Group
×
“We invest in Kames Property Income partly because it blends together a very competitive yield and investment in small lot sizes in the secondary property market. As long-term investors we also like how it provides diversification with other larger property funds.”
Sheldon MacDonald_ deputy CIO_ Architas
“We use the Kames Property Income Fund to diversify our property exposure. As well as an allocation to core bricks and mortar, the fund will typically have a large allocation to alternative areas of the market where there are opportunities to add value to property through redesign, refurbishment or changes to the terms of the lease."
“We like the balance Kames Property Income provides with other funds. It invests more in secondary property rather than big office blocks to provide decent yields. We also like the fact its managers do not follow any index as well as their preference for looking at smaller commercial properties outside the metropolis.”
Steve Norman_ partner_ Bottriel Adams
James Calder_ research director_ City Asset Management
“David Wise is a highly-experienced manager and knows his market very well indeed. The fund is highly geared into the ‘real’ domestic UK economy and focuses on buying properties that can be developed to increase in quality. Wise also benefits from looking for smaller lot sizes that the bigger groups tend not to look at.”
Robert Shepherd_ Director_ Bright & Co.
We were on the lookout for something different and, let’s face it, 4% or lower is the norm in this environment. So this is attractive”
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Achievable, sustainable, reliable
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Fund
Manager
Perspective
Fund Buyer
Perspective
This demo version has been optimised for desktop, laptop and tablet. Smartphones, iPhones will be supported in the next version.
to bring you insight, research and market views
together with an explanation of the strategy
directly from the fund managers themselves.
Axis analyses the fund from four perspectives
This was not the case for investors in Kames Property Income because how and where it invests, as well as the skill and experience of its management team, meant it was far better prepared than others come the reaction to 23 June, 2016.
It means that where they needed to, they had a greater choice of what they sold and were able to go to a larger-in-number and more diverse set of buyers of properties in the bracket they operate in. Added to their double-digit cash holdings, this gives Kames Property Income a great deal of underlying liquidity which complements the diversification it provides as part of a multi-asset portfolio.
Currently, the fund invests in around 48 properties - although as it raises assets and has cash to invest the number of properties will increase - that are diversified throughout the UK. It has a very definite focus in the regions and away from London and this diversification is another feature that distinguishes it from other more mainstream propositions, investing in what the team sees as less volatile, more boring parts of the market. They are most definitely not about buying trophy assets; they are most definitely about generating steady income returns that they tend to get from smaller assets in the regions rather than vanity projects based in London.
Their investment process is fundamentally about generating value and the search for yield which they say they find more effectively the further away they are from London and the Southeast.
Their largest exposure is in the office sector where they have a great deal of expertise and knowledge. Possibly the most significant area of difference with most of their competitors is that they hold around 50% of the fund in active value or good secondary property. These are typically higher-yielding assets valued at £5m-£20m, delivering a yield of 7% or more. Around 30% of the fund is held in core assets, with the other 20% in liquidity assets including cash and Reits.
This combination means the team is well placed to continue providing income and the potential for capital growth in an attractive, long-term proposition.
The £529m fund is run by a team headed by co-managers David Wise and Richard Peacock. Wise, who is also head of the direct property investment team, joined Kames Capital in 2007 and Peacock following him from Aviva Investors where the two previously worked together, in December 2016.
One distinguishing feature of the fund is where the managers invest. They prefer the smaller end of the property market, looking at lot sizes in the range of £5m-£20m.
As a buyer, they are not often competing against other property funds when looking to make an investment. Instead they tend to find themselves up against property companies, family offices and high net worth private investors. The benefits that Kames Capital can give the sellers is their size, scale and expertise offering less transactional risk because, as Wise says, they are a “desirable purchaser”.
These smaller lot sizes also make them more nimble when, as with the middle of 2016 in the weeks following the UK EU referendum vote, they become a seller. The extent to which the multi-billion-pound property funds reacted by suspending trading, effectively shutting their doors and locking investors in, was arguably an over-reaction and largely unnecessary.
The £529m fund is run by a team headed by co-managers David Wise and Richard Peacock. Wise, who is also head of the direct property investment team, joined Kames Capital in 2007 and Peacock following him from Aviva Investors where the two previously worked together, in December 2016.
One distinguishing feature of the fund is where the managers invest. They prefer the smaller end of the property market, looking at lot sizes in the range of £5m-£20m.
As a buyer, they are not often competing against other property funds when looking to make an investment. Instead they tend to find themselves up against property companies, family offices and high net worth private investors. The benefits that Kames Capital can give the sellers is their size, scale and expertise offering less transactional risk because, as Wise says, they are a “desirable purchaser”.
These smaller lot sizes also make them more nimble when, as with the middle of 2016 in the weeks following the UK EU referendum vote, they become a seller. The extent to which the multi-billion-pound property funds reacted by suspending trading, effectively shutting their doors and locking investors in, was arguably an over-reaction and largely unnecessary.
This was not the case for investors in Kames Property Income because how and where it invests, as well as the skill and experience of its management team, meant it was far better prepared than others come the reaction to 23 June, 2016.
It means that where they needed to, they had a greater choice of what they sold and were able to go to a larger-in-number and more diverse set of buyers of properties in the bracket they operate in. Added to their double-digit cash holdings, this gives Kames Property Income a great deal of underlying liquidity which complements the diversification it provides as part of a multi-asset portfolio.
Typically, the fund invests in around 40 properties that are diversified throughout the UK with a very definite focus in the regions and away from London. This is another feature that distinguishes it from other more mainstream propositions, investing in what the teams sees as less volatile, more boring parts of the market. They are most definitely not about buying trophy assets; they are most definitely about generating steady income returns that they tend to get from smaller assets in the regions rather than vanity projects based in London.
-
Income
target_
Size of
fund in £_
m
Launch date_25/02/2014
Performance
year to date_
Number of
holdings_
%
.
Kames Diversified Monthly Income Fund
pa paid monthly
Performance
since launch_
Total return
target_
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David is head of the direct property team at Kames Capital and co-manages the Kames Property Income Fund. With 34 years’ investment experience he has invested across the full range of property cycles and is chairman of the Association of Real Estate Fund Corporate Governance committee.
Co-manager, Kames Property Income Fund
Richard Peacock
David Wise
Richard is a fund manager in the Kames property team and co-manager of the Kames Property Income Fund. Previously at Aviva, he joined Kames in 2016 and has 20 years’ experience in property investment.
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a monthly income distribution
A bricks and mortar fund that pays out
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The first group of properties, which require active management, is where the managers feel they can really add value for investors and they are proactive in improving these properties, largely through refurbishment programmes. Taking on such work means that the improved properties will command higher rental values, and often better lease terms than they did before the work.
Another feature of this fund is its wide geographical exposure, with a much lower weighting to London and the Southeast than the IPD index. This means that the fund could perform slightly differently to the index and potentially provide investors with diversification against their other property holdings.
This is one of the few retail commercial property funds to invest in properties with smaller lot sizes, another differentiating factor versus many of the its competitors. It is unusual for this fund to be competing with others in the space over the purchase of any property, instead their main competitors are likely to be wealthy individuals, family offices and so on.
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Subtitle of introduction panel
"We invest in Kames Property Income partly because it blends together a very competitive yield and investment in small lot sizes in the secondary property market. As long-term investors we also like how it provides diversification with other larger property funds."
Sheldon MacDonald_ CIO_ Architas
“The key differentiators of Kames Diversified Monthly Income are its lack of a government bond allocation and large exposure to property and specialist income funds such as Infrastructure, renewable energy generation and aircraft leasing. However, the overall level of risk may rise to maintain the income target, which investors must be comfortable with.”
Steve Norman_ partner_ Bottriel Adams
James Calder_ research director_ City Asset Management
market viewpoints, together with the
to bring you incisive analysis, research and
Fund Manager’s own investment strategy.
Axis interrogates the fund from four perspectives
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Diversifie
Kames Global
Diversified
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Diversified
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Diversified
Inco
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Diversified
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Income Fund
Kames Property Income is different from most other property funds, particularly other bricks-and-mortar funds. To start with, it emphasises the generation of income in its investment strategy - and in its product title - with the aim being to distribute around 5.5%pa on a monthly basis. It has a historic yield of 5.05%.
Review By Gary Corcoran at Last Word
This was not the case for investors in Kames Property Income because how and where it invests, as well as the skill and experience of its management team, meant it was far better prepared than others come the reaction to 23 June, 2016.
It means that where they needed to, they had a greater choice of what they sold and were able to go to a larger-in-number and more diverse set of buyers of properties in the bracket they operate in. Added to their double-digit cash holdings, this gives Kames Property Income a great deal of underlying liquidity which complements the diversification it provides as part of a multi-asset portfolio.
Currently, the fund invests in around 48 properties - although as it raises assets and has cash to invest the number of properties will increase - that are diversified throughout the UK. It has a very definite focus in the regions and away from London and this diversification is another feature that distinguishes it from other more mainstream propositions, investing in what the team sees as less volatile, more boring parts of the market. They are most definitely not about buying trophy assets; they are most definitely about generating steady income returns that they tend to get from smaller assets in the regions rather than vanity projects based in London.
Their investment process is fundamentally about generating value and the search for yield which they say they find more effectively the further away they are from London and the Southeast.
Their largest exposure is in the office sector where they have a great deal of expertise and knowledge. Possibly the most significant area of difference with most of their competitors is that they hold around 50% of the fund in active value or good secondary property. These are typically higher-yielding assets valued at £5m-£20m, delivering a yield of 7% or more. Around 30% of the fund is held in core assets, with the other 20% in liquidity assets including cash and Reits.
This combination means the team is well placed to continue providing income and the potential for capital growth in an attractive, long-term proposition.
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David is head of the direct property team at Kames Capital and co-manages the Kames Property Income Fund. With 34 years’ investment experience he has invested across the full range of property cycles
and is chairman of the Association of Real Estate Fund Corporate Governance committee. Richard is a fund manager in the Kames property team and co-manager of the Kames Property Income Fund. Previously at Aviva, he joined Kames in 2016 and has 20 years’ experience in property investment.
Kames Property Income has a focus on generating a regular income stream, aiming for a yield of about 5.5% pa over the market cycle, with a monthly distribution. The fund tends to have exposure to smaller properties than many of its competitors, with an average lot size of £5-20m. This, combined with the focus on income, means that the fund may behave quite differently to both the IPD index and many of its competitors, and could be a useful diversifier for income-hungry investors. Disclaimer »
A bricks and mortar fund that pays out a monthly income distribution
“Despite the fact that many investors buy commercial property, at least in part for its income-generating characteristics, this fund is unusual in its explicit goal of targeting a high yield which it pays out monthly. While the fund only has a relatively short history, the team at Kames Capital have been running money in this style for far longer, and the fund could prove very interesting both for clients who would benefit from the monthly income payments and for those who simply wish to diversify their property holdings .”
John Monaghan, senior investment research analyst, Square Mile
“We use the Kames Property Income Fund to diversify our property exposure. As well as an allocation to core bricks and mortar, the fund will typically have a large allocation to alternative areas of the market where there are opportunities to add value to property through redesign, refurbishment or changes to the terms of the lease.”
“David Wise is a highly-experienced manager and knows his market very well indeed. The fund is highly geared into the ‘real’ domestic UK economy and focuses on buying properties that can be developed to increase in quality. Wise also benefits from looking for smaller lot sizes that the bigger groups tend not to look at."
and market views together
Axis analyses the fund
strategy directly from the
from four perspectives to
bring you insight, research
fund managers themselves.
with an explanation of the
The £529m fund is run by a team headed by co-managers David Wise and Richard Peacock. Wise, who is also head of the direct property investment team, joined Kames Capital in 2007 and Peacock following him from Aviva Investors where the two previously worked together, in December 2016.
One distinguishing feature of the fund is where the managers invest. They prefer the smaller end of the property market, looking at lot sizes in the range of £5m-£20m.
As a buyer, they are not often competing against other property funds when looking to make an investment. Instead they tend to find themselves up against property companies, family offices and high net worth private investors. The benefits that Kames Capital can give the sellers is their size, scale and expertise offering less transactional risk because, as Wise says, they are a “desirable purchaser”.
These smaller lot sizes also make them more nimble when, as with the middle of 2016 in the weeks following the UK EU referendum vote, they become a seller. The extent to which the multi-billion-pound property funds reacted by suspending trading, effectively shutting their doors and locking investors in, was arguably an over-reaction and largely unnecessary.
3:05
3:05
Speed
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0.5x1x1.25x1.5x1.75x2xQuality
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David is head of the direct property team at Kames Capital and co-manages the Kames Property Income Fund. With 34 years’ investment experience he has invested across the full range of property cycles and is chairman of the Association of Real Estate Fund Corporate Governance committee. Richard is a fund manager in the Kames property team and co-manager of the Kames Property Income Fund. Previously at Aviva, he joined Kames in 2016 and has 20 years’ experience in property investment.
Kames Property Income has a focus on generating a regular income stream, aiming for a yield of about 5.5% pa over the market cycle, with a monthly distribution. The fund tends to have exposure to smaller properties than many of its competitors, with an average lot size of £5-20m. This, combined with the focus on income, means that the fund may behave quite differently to both the IPD index and many of its competitors, and could be a useful diversifier for income-hungry investors. Disclaimer »
Ian Walsh_ director_ Michael Ambrose Group
that pays out a monthly
Scroll down to see what the Fund Managers have to say...
Scroll down to see what the Fund Buyers have to say...
B Acc Gross share class
* Launch date - 28 March, 2014
Data as at 31 August 2017
Kames Property Income
Historic
yield_
Annualised performance
since launch_
Size of
fund (£)_
*
Target distribution
yield_
Cumulative Performance
since launch_
Asset class comparators
Source: Portfolio Analysis Services; Kames Capital; MSCI Inc.
As at 17 May ‘17
12
Annualised returns (%)
10 years
2
6
3 years
Inflation (RPI)
0
4
5 years
Bonds (JP Morgan GBI 7-10 yr)
10
Equities (MSCI UK)
8
UK property % (IPD Universe)
Source: FE Analytics; Square Mile
Since launch (28 March, 2014)
Kames Property Income B Gr Acc share class
Kames Property Income - dividend and yield
Feb
0.6
Jul
Aug
Jun
May
5.8
4.8
May
0.8
Jan ‘15
4.6
Mar
5.2
Apr
Oct
Dec
Nov
0.3
Apr ‘14
Sep
0.4
5.6
6.0
Dividends (pence per share)
0.7
5.0
0.5
Jan ‘17
5.4
0.2
Fund yield (RHS)
0.1
Jan ‘16
Source: FE Analytics