Wealth managers and financial advisers are turning to property investments as a route to de-risking through diversification and achieving an increased focus on ESG.

This is according to research commissioned by TIME Investments which found that 70 per cent of respondents are targeting between 11 per cent and 20 per cent allocation to property as part of their clients’ portfolios.

TIME found that more than two thirds (67 per cent) of advisers surveyed are using UK direct property, which are funds that directly own physical assets, while 30 per cent are allocating to listed property such as REITs.

The research also highlighted that investment in property funds is set to rise, with over half of respondents (53 per cent) expecting to increase their clients’ allocation to direct property over the next 12 to 24 months, and 47 per cent keeping allocations the same.

TIME Investments head of real estate and fund manager, Roger Skeldon, said that the outlook for UK property was looking “positive”.

“In the physical property sector, yields are stabilising, and rental growth will be the key driver of returns,” commented Skeldon.

“We are seeing a positive reaction to the recent interest rate cut and there is more diversity in the larger REITs as the UK market has matured, meaning exposure can be more effectively spread across different property sub-sectors.”

TIME’s research was based on a study of 75 UK wealth managers, financial advisers, discretionary fund managers and fund selectors, who have clients with minimum investible assets of £200,000.

The findings also indicated that advisers and wealth managers are keen to explore more innovative options to enable their clients to access property investments.

One example is that the vast majority (98 per cent) of those interviewed said they would be likely to recommend a “hybrid” property fund to a client, which provides a unique blend of direct property and listed securities such as REITs.

When asked why they would select hybrid property funds for their clients, 70 per cent said it was for their ability to provide attractive risk-adjusted returns and two thirds (67 per cent) selected their ability to lower volatility when compared to a portfolio of listed real estate securities.

A further 53 per cent cited the attractive diversification benefits hybrid funds offer across a wide range of property sectors.

Skeldon added: “Our research shows that advisers and wealth managers are increasingly looking to property investments as a route to diversification and a way to help their clients achieve attractive risk adjusted returns, without the volatility associated with mainstream equity investments.”

---