The Fund Manager: Vince O'brien, Norwich Property: A portfolio built in bricks and mortar

NEARLY ALL unit trusts are invested largely or wholly in shares, and the bulk of the remainder are concentrated on portfolios of fixed interest securities. But there are a handful of trusts that offer private investors access to other asset classes, one being the Norwich Property Trust. Originally set up as an unauthorised unit trust in 1989, it was one of the first to take advantage of new rules in 1991 allowing authorised trusts to invest directly in property.

The fund's manager since mid-1992 has been Vince O'Brien. "I was a qualified chartered surveyor and I joined Norwich Union in 1984 after two and a half years in private practice in London. I spent my first three years here working on the managed life fund and was responsible for the property element of our pooled pension fund."

He assumed overall responsibility for the pension fund in 1989 at the same time as plans for the Property Trust were coming to fruition. "The characteristics of property, equities or bonds are very similar and property investment covers the whole spectrum," he says. "It goes from being similar to investing in equities, when there is strong growth, to being like a gilt investment, when you are getting high income with very little growth."

One of the key aspects of the rules governing authorised property unit trusts is a limit to the amount directly invested in buildings. "Under the regulations, at least 20 per cent has to be invested in something other than bricks and mortar, and we choose to hold property shares, which account for around 30 per cent of the portfolio."

Mr O'Brien's philosophy of fund management would be equally applicable across other asset classes. He says: "You have to take every property on its own merits. For example, we would buy offices even if we wanted to be underweight in the office sector, if we saw an office property with potential we thought others had missed. We have to look at our top-down view compared with what actually comes across our desk that is available to buy. Most property is held by institutions which don't want to sell, so you have to deal with the 1 or 2 per cent that does come onto the market."

One potential drawback to investing in physical property is the relative lack of liquidity, but Mr O'Brien says the structure of his fund eliminates much of the difficulty. "Liquidity has not been much of a problem because We have a rigorous approach to cash flow, which means we can plan property sales where necessary and give investors their money back when they need it. Plus you have the regulations which mean you have to have at least 20 per cent in cash and shares, and that gives an extra element of liquidity. In 1995, we had pounds 15m of redemptions in a fund of only pounds 100m and everybody got their money in five days." He contrasts his unit trust with property life assurance bonds, which are purely invested in direct property.

He adds: "If an investor wants to invest in property he also wants to be able to get in and out. Fifteen years ago, the choice for most private investors was UK shares or UK shares. Now there are so many options and if people want to take money out of property and put it into, say, Japan, they don't want to have to wait three months to do it."

The profile of the portfolio has a relatively high share element. "The strategy for the past few months has been overweight in property shares. At the end of last year, the stock market was depressed and we thought property shares were oversold. We began buying heavily in the first quarter of this year and are still buying a few shares now. But the property sector has outperformed the FTSE 100 this year by a similar amount to that which it underperformed last year. We have 32 per cent in shares, compared to around 18 per cent 18 months ago, so new money coming into the fund will likely go into direct property because we will probably want to sell shares over the next 3 to 6 months."

The share portfolio is weighted towards larger companies, with major holdings including British Land (3.8 per cent of the portfolio), Land Securities (2.78), Pillar Property (2.6) and Chelsfield and MEPC (around 2.1 each). The largest individual direct property holding is an industrial development in Didcot (3.1 per cent), followed by office developments in the City of London (2.52) and Bristol (2.1) and a retail investment in Harrogate (2.16).

Mr O'Brien also suggests the profile of the direct portfolio is starting to change. "Direct property is becoming more diverse. Traditionally you were just looking at offices, retail and industrial, but other areas are opening.

"Last month we invested in our first hotel. A lot of hotel groups want to release capital and take 35-year leases with yields of around 8 to 9 per cent and increases linked to the RPI. If you assume inflation of around 2.5 per cent, then you are looking at total returns of 11 to 12 per cent, which are very acceptable indeed."

FUNDAMENTAL FACTS

Fund Manager: Vince O'Brien

Age: 38

Fund : Norwich Property

Size of Fund: pounds 254.10m

Fund Launched: 1991

Manager of Fund: Since July 1992

Current Yield: 3.74%

Initial Charge: 5.00%

Annual Charge: 1.25%

Current Bid/Offer Spread: 5.00%

Minimum Investment: pounds 1,000 (then pounds 250)

Minimum Monthly Savings: pounds 50

Standard & Poors' Micropal Rating (maximum *****):

not applicable

Fund performance (to 1 September 1999)

(offer-to-bid, with net income reinvested):

One Year 9.53%

Two Years 20.95%

Three Years 72.44%

Five Years 41.39%

Seven Years 99.04%

Since Launch 83.59%

News
John Travolta is a qualified airline captain and employed the pilot with his company, Alto
people'That was the lowest I’d ever felt'
Life and Style
healthIt isn’t greasy. It doesn’t smell. And moreover, it costs nothing
News
i100

Other places that have held independence referendums
Sport
Jonas Gutierrez (r) competes with Yaya Toure (l)
football

Newcastle winger Jonas Gutierrez reveals he has testicular cancer - and is losing his trademark long hair as a result

PROMOTED VIDEO
Arts and Entertainment
Blossoming love: Colin Firth as Stanley and Emma Stone as Sophie, in 'Magic in the Moonlight'
film

Actors star in Woody Allen's 'Magic in the Moonlight'

News
peopleThe Times of India said actress should treat it as a 'compliment'
News
news

Watch this commuter wage a one-man war against the Circle Line
News
We are phenomenally good at recognising faces; the study showed that humans have been selected to be unique and easily recognisable
science

Human faces unique 'because we don't recognise each other by smell'

Property
Home body: Badger stays safe indoors
lifeShould we feel guilty about keeping cats inside?
News
A male driver reverses his Vauxhall Astra from a tow truck
news

Man's attempt to avoid being impounded heavily criticised

News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
US pop diva Jennifer Lopez sang “Happy Birthday” to Gurbanguly Berdimuhamedow, president of Turkmenistan
musicCorporate gigs become key source of musicians' income
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig believed to be donning skis as 007 for first time
Student
The Guildhall School of Music and Drama is to offer a BA degree in Performance and Creative Enterprise
student

Arts and Entertainment
Pulp-fiction lover: Jarvis Cocker
booksJarvis Cocker on Richard Brautigan
Arts and Entertainment
Robin Thicke and Pharell Williams in the video of the song, which has been accused of justifying rape
music...and he had 'almost no part' in writing it
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Recruitment Consultant - Soho - IT, Pharma, Public Sector

£20000 - £25000 per annum + OTE £35,000 first year: SThree: The SThree group i...

Sales Executive

£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

Payroll & Accounts Assistant

£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week