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Global commerical property exposure
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Cm258
Posted: 03 March 2025 15:41:09(UTC)
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As you'll see in my thread https://moneyforums.city...ortfolio-60-and-80.aspx I am following the Tim Hale Global Tilt portfolio. In the book, the rationale for the risk factors (developed value and developed small cap) are really well explained and backed up with evidence. However Hale also advocates an allocation to global commercial property, 6% in a balanced 60/40 portfolio and 8% in an 80/20 portfolio.

The vehicle he suggests for this exposure is ETF HPRO, which tracks the FTSE EPRA/NAREIT Developed index.

What are the forums view on commercial property? Is this really a good component of ones 'return engine', or is it sensible to keep things simple and stick to equities?

Thanks.
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AlanT on 04/03/2025(UTC)
Tom 123
Posted: 03 March 2025 17:23:08(UTC)
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The point of owning property is for it to not act like equities.

However unless you own the real thing funds tend to have equity like returns. So I struggle to see a good way of owning it.

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Jon.Snow on 03/03/2025(UTC), Cm258 on 03/03/2025(UTC)
Cm258
Posted: 03 March 2025 19:05:55(UTC)
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Tom 123;336384 wrote:
The point of owning property is for it to not act like equities.

However unless you own the real thing funds tend to have equity like returns. So I struggle to see a good way of owning it.



Thanks. I need to reread the section of the book.

Comparing VWRL to HPRO, over 10 years the annualized return is 11.3% vs 4.5%

March 23rd 2020, VWRL was down 20% and HPRO down 30%...

Comparing the two, HPRO has much higher volatility and correlation over 3 years is 0.77

Food for thought!
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Spark on 06/03/2025(UTC)
bearcub
Posted: 03 March 2025 19:21:03(UTC)
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Joined: 07/05/2023(UTC)
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Cm258;336375 wrote:

What are the forums view on commercial property? Is this really a good component of ones 'return engine', or is it sensible to keep things simple and stick to equities?

It depends on the size of your portfolio. My job brings me into contact with developers and occasionally with property investors – commercial property doesn't have to mean a £100mn office block in central London, it could be a £500k parade of shops in your hometown. If you have some knowledge of dealing with letting agents and property maintenance, you could buy and hold directly. I'd think the main thing is understanding rental yields, contracts and having sharp solicitors to help you.

As for global commercial property, I guess you're looking at niches such as Tritax BigBox and Segro for logistics, or a company like PHP plc for healthcare.
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Isaac J
Posted: 03 March 2025 21:42:04(UTC)
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I think these are probably already highly correlated with other equities, but unless I'm mistaken you've mentioned potentially holding HSBC Global Strategy funds? I note the Balanced fund has a separate 5.4% allocation to HPRO, and the Dynamic fund 7.3%. So not too far from the weighting you mentioned. Just food for thought if you do end up buying those funds.
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Jay P on 03/03/2025(UTC), Sara G on 03/03/2025(UTC), Cm258 on 04/03/2025(UTC), AlanT on 04/03/2025(UTC)
Thrugelmir
Posted: 03 March 2025 22:49:31(UTC)
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Cm258;336398 wrote:


Thanks. I need to reread the section of the book.

Comparing VWRL to HPRO, over 10 years the annualized return is 11.3% vs 4.5%

March 23rd 2020, VWRL was down 20% and HPRO down 30%...

Comparing the two, HPRO has much higher volatility and correlation over 3 years is 0.77

Food for thought!


When was this version of the book published? I read his first book many moons ago but haven't followed updates since. As with Lar Krojer's "Investing Demystified". The trade works for a while. Many people adopt. The economic conditions change. The investment fad goes out of fashion.

Interestingly I did read a piece of research the other day on holding property as a diversifier. The summing up was that over the past 30 years it had provided disappointing returns overall as a sector. Made no statement as what to the future might hold. Though I do wonder if the post GFC era with all it's exceptional facets has clouded the relative performance. Against equities which were unquestionably boosted by fiscal policies.
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Sara G on 03/03/2025(UTC), Cm258 on 04/03/2025(UTC)
Cm258
Posted: 04 March 2025 06:52:20(UTC)
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Isaac J;336413 wrote:
I think these are probably already highly correlated with other equities, but unless I'm mistaken you've mentioned potentially holding HSBC Global Strategy funds? I note the Balanced fund has a separate 5.4% allocation to HPRO, and the Dynamic fund 7.3%. So not too far from the weighting you mentioned. Just food for thought if you do end up buying those funds.


Yeah I had spotted that. I think 6% in the 60/40 isn't enough to make any real difference should there be a negative correlation to equities. Even if equities corrected -10% and somehow HPRO went up by 10%, it will make so little difference overall.

Looking at Monevator and their posts about the GFC, Coronavirus and other crashes, property sinks just as much if not worse than equities.

Perhaps future returns may be better but again with such small allocations I'm not sure how it really helps as a diversifier.

Final point, I imagine that for property, there is benefit in going active. But then it's a gamble choosing the right active fund or IT.

So as you can probably guess, I'm questioning the allocation to property (HPRO specifically) in both my ISA and SIPP. More so my SIPP, which is 8% (£24k) HPRO, when I've got 20+ years until pension access age. Surely equities make sense there!
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