Property shares still have further to fall, a top equity fund manager has said.

‘We think the point of maximum pessimism is still ahead of us, but is getting closer,’ Chris Turner, manager of Thames River Property Investment Trust, said. ‘The spotlight of concern is shifting from the state of financial markets to the weakening economic environment across Europe.‘

We also have to watch for the timing, type and speed of the eventual recovery. What falls fastest doesn't always recover fastest, but it is essential to consider how UK and European property shares might perform, and clearly UK stocks should have far more potential for recovery. ‘

Well regarded

The trust, which buys shares in UK and European property companies, is one of the most well-regarded property equity funds in the market, among institutions and private investors.

It has outperformed its Benchmark for the tenth consecutive year, despite what it described as a ‘brute of a year’ for property shares.

It produced a benchmark total return of -23%, compared to -25.4% for the FTSE/EPRA/NAREIT European Property Share Index it revealed in its results for the year to 31 March. Its net asset value total return was -23% and it’s share price total return was -25%.

Conservative approach

The trust said that in spite of things getting better since Christmas, the outlook for property shares remained bleak and it was taking a conservative approach to share selection.

‘For the present the balance sheets and portfolio selections of both share classes reflect a preference for solid cash flow and stocks with modest leverage,’ chairman Peter Salsbury said. ‘This conservative approach aims to reduce downside risk, but carries the risk of being slower to invest in upside opportunities.’