But Mr Ferguson adds the size of his fund, and the links built up with brokers around the country, meant that he had managed to get access to certain deals that “smaller managers may not be aware of”.
Philip Nell, manager of the £1.8bn Aviva Investors Property Trust, also says his links to brokers have also come in handy in the past year as he sought to avoid the heavily competitive parts of the auction market.
He explains he has so far bought eight properties in 2014, of which “two were in full competition on the market, two were in limited competition and the other four were been completely off the market”.
“So we have managed to buy and not had to buy in competition all the time, which is important because there is a lot of money out there,” Mr Nell explained.
Moving out of the mainstream
While some managers have avoided the crowds by buying off-market, Ainslie McLennan, co-manager of the £2.4bn Henderson UK Property fund, says she has begun to invest in slightly more esoteric assets.
Ms McLennan continues that while “there is a lot of competition” for assets at present, she and co-manager Marcus Langlands Pearse have managed to spend £740m on new properties so far in 2014.
But to do that the managers have bought into areas of the market such as “private hospitals, leisure facilities, cinemas” that are outside the conventional remit of office, industrial and commercial buildings bought by most managers.
Ms McLennan stresses each property still had to meet the managers’ strict criteria and be a good fit for the fund and it was possible to find such assets in unconventional areas.
Managers are having to find innovative ways of deploying the money flowing into their funds into order to avoid ‘cash drag’, where a high level of cash in a fund drags down the overall yield offered to investors.
Most property managers keep at least 10 per cent in cash or liquid assets in order to meet redemptions from investors but the rush of money had seen that level rise in many funds, forcing managers to act.
In spite of the many concerns around the influx of money and the impact on property funds, no-one else has yet taken the step of Threadneedle and all insist on their own ability to still get deals done.
For investors in property funds, the question is whether the easy money has been made or if we might soon see a return to the days when the return from a property fund was just its annual yield.
Opinions are divided on that. Ms McLennan argues the capital gains from property have been front loaded to this year and the start of 2015, meaning the “hot money” may begin to flow out, possibly causing liquidity problems, by the middle of next year.
