Commercial property, that is - the residential sector is still primarily an area for those who want to buy up a home or two and rent them out, rather than investors for whom pooled funds are the key mechanism for spreading risk and delivering good returns.
To date, there have not been too many of the latter. Chris Laxton, property investment director at Norwich Union Investment Management, says: "It has proved to be something of an enigma, with only a few funds investing in this area and only one, ours, of any real size.
"There have been three principal reasons for this. One is that at the time of their launch in 1991, property funds came onto the market at a time of cyclical downturn and quite a few investors got their fingers burned. It also took a bit of time to set these funds up: without investors, they needed seed capital from the fund managers.
"Also, fund managers were waiting for the Government to allow investment trusts for commercial property, but this did not happen."
Nor can it be said that property funds' investment performance has been sparkling. In the 12 months to 2 June, according to Micropal, the financial statistics provider, the Norwich Property unit trust, which has more than pounds 243m under management, delivered returns of 1.92 per cent. The Aberdeen Property Share fund, with pounds 19m, lost 12.62 per cent. Barclays Property fund, which has pounds 16m under management, recorded losses of 1.23 per cent.
Over three years, the picture is better, though not sparkling. Norwich's fund achieved returns of 32.42 per cent, Aberdeen delivered 36.71 per cent while Barclays has achieved 20.41 per cent.
Mr Laxton says: "Property still remains a good option at the moment compared to gilts or bonds. Income yield from rentals is about 7 per cent a year. We don't have a supply and demand imbalance, lease lengths are about 13 to 14 years and there is the potential for asset growth."
Earlier this week, Portfolio Fund Management, a fund management firm which is owned by the insurer Liberty International and offers 10 unit trusts, launched a Portfolio Property Fund which aims to invest in a combination of commercial property and shares in property companies. Property assets will be managed by Capital & Counties, a member of the Liberty Group, which owns assets of pounds 3.1bn worldwide. The fund aims to achieve an initial yield of 6.1 per cent and stresses its commitment to liquidity, ensuring that investors can obtain access to their funds whenever they need them.
Is commercial property worthwhile? Chris Laxton, at Norwich Union, says: "I would not necessarily recommend it to someone who has pounds 5,000 to invest, but it can be useful if someone is fully invested elsewhere and thinks in terms of up to 10 per cent of their capital."
Mr Laxton adds a note of warning for investors: "You must be prepared to invest for at least five years or longer in this sector. Also, you should check whether the charges on the fund come from the capital or the yield. If from capital, there is the risk of capital erosion."
Norwich Union's annual charges of 1.25 per cent come from its yield. Portfolio's 1.5 per cent come from capital. The initial charge on the Portfolio fund is 5 per cent, with a 1 per cent discount for early investors. Call 0171 588 8890 for details.
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