Investec to Double UK Commercial Property Investment

on Jun 10, 2013

Investec (LON:INVP) will double its allocation to UK commercial property in a bid to cash in on the recovery of the real estate sector, The Times has reported.

The UK-based specialist bank’s wealth management arm, Investec Wealth & Investment, is to move its discretionary British clients to an “overweight” holding in commercial property over the next 12 months. This means an additional £500 million of its wealthy clients’ money will be invested in well-run UK property companies and real estate funds.

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The decision is a significant shift in strategy for Investec Wealth which has £40 billion of assets under management of which £22 billion is invested on behalf of UK clients, The Times highlighted today. It quoted the group’s chief investment officer, Chris Hills, as saying: “This is the first move to materially increase our allocation to property in five years [since the property market crashed], so yes I suppose we are calling the market.”

Investec Wealth’s recommended balanced portfolio has 2.5 percent of its funds invested in UK commercial property. Last week its Asset Allocation Committee voted to increase this to 5.5 percent, which would result in the total of nearly £1 billion of clients’ money invested in real estate.
**Looking Further Afield**
While most property investment companies and individuals are pouring money into London, which has shown the boldest signs of stabilising after the financial crisis, Investec Wealth had said that it would look further afield, tapping into lucrative property investment opportunities outside the capital, The Times has noted.

Hills has said, as quoted by the newspaper today, June 10: “Capital values outside London have hardly recovered from the lows of 2009 and yields are much higher than in London.”
In recent months, equity markets and bond prices have both been fuelled by liquidity provided by central banks. The total return from commercial property values has failed to keep pace with either of those two asset classes, which, according to Hills, has left rental yields “looking anomalously high and appealing to those seeking income”. He told The Times that if investing in Birmingham or Manchester at a seven percent yield and then capital values start to go up again it would build up “a nice total return.” Further explaining Investec’s move to double its property investment bet, Hills said that real estate has comparatively low volatility but encompasses participation in future economic growth and potential protection against
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**Investec Share Price Drops**
London-listed Investec today opened 1.53 percent below its previous trading day’s closing level. The shares traded 1.64 percent down at 442.50p as at 08:06 GMT. In the year to date, the Investec share price has gained 4.56 percent.


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