Offshore listed property trusts have come under fire from analysts for the second time in the past few months, with Merrill Lynch warning that they were uncompetitive and risked conflicts of interest.
The Merrill report highlights the cost and structure of management fees (see chart) and the fact that many trusts do not have a dedicated manager as key areas for concern.
It states: “Performance fees are not standard and managers are often given incentives
to increase assets under management (through fees based on gross assets) rather than deliver outperformance.”
Of the four trusts detailed Insight Foundation Property Trust, F&C Commerical Property Trust, ING UK Real Estate Income Trust and Scottish Widows UK Balanced Property Trust only the Insight, now Invista, vehicle is recommended as a buy.
Within the group, only IFPT’s management fee 2.2% carries a performance element.
The bank also points out that the F&C fund (1.1% management fee) carries 20% of indirect investment through The Mall and Legal & General’s Industrial Property Investment Fund, adding further costs.
But ING and F&C defended the vehicles, saying they were performing well.
