The four funds making the inaugural cut are M&G Property Portfolio, Columbia Threadneedle’s UK Property fund, F&C’s UK Property fund and the Freehold Income Trust.
Previously thought too difficult to rate from a purely quantitative approach because of issues regarding the use of appraised values, which it said can greatly distort the performance and behaviour of the funds, FE has taken the decision to rate the funds on the income produced over and above capital appreciation.
This, it said is both more stable and more measurable and, is the most attractive part of the asset class. Before reviewing the funds though, FE first filters the property sector to exclude non-physical property funds, institutional funds and any funds with less than a three year track record.
Then, each fund is rated on three income components, before undergoing a rigorous qualitative assessment.
The three components are: a quantitative analysis of past income and its stability over time; a qualitative assessment of income distribution on a forward-looking basis; fund structure