Morrell has managed the HSBC Open Global Property fund of funds since its launch in November 2007. He is the only FE Alpha Manager in the IMA Property sector – which has 40 funds.
Morrell says his success stems from striking the right balance between physical property funds and those that invest in property equities, and retaining a global mentality.
"The main difference with our fund is that we invest in two areas: listed property funds and unlisted 'bricks and mortar' funds," he explained.
"We allocate actively between the two, which is quite a differentiating feature."
"Global property investment is really about understanding local markets."
"We start with a top-down view and then aim to select the best from each regional market. We want managers who have that local knowledge and expertise who can try and add value."
Morrell’s fund has returned 26.8 per cent since launch, compared with a loss of 3 per cent from the IMA Property sector over the same period.
Performance of fund vs sector since Nov 2007
Source: FE Analytics
Morell’s fund has been slightly more volatile than its peers over that time.
HSBC Open Global Property has also beaten the sector over one and five years, but has fallen short over three.
Morrell says the fund’s longer term numbers are a result of a global approach to the property market; an approach he feels a non-fund of funds manager would not be able to take.
He commented: "Most funds are run by single managers – and there are some very good ones out there – but it is very difficult for any one manager to claim expertise in diverse markets such as London offices, shopping malls in North America, logistics in continental Europe and commercial property in Hong Kong."
"We have the diversification between listed and 'bricks and mortar' funds, by geography and by sector, and we hold a portfolio of funds that give us diversification across these factors."
"But one theme that shouldn’t be understated is that you need to diversify by manager."
"The financial crisis taught us all that it is vital to diversify by manager because you do not want all of your eggs in one basket."
Morrell’s £45.3m fund is a concentrated portfolio of just 14 holdings. Its largest regional weighting is in the UK, at 39.3 per cent, but he also holds funds that focus on the Asia Pacific, the US and Europe.
HSBC Open Global Property counts the likes of Schroder ISF Asia Pacific Property Securities and Henderson UK Property as top-10 holdings.
The manager currently has 62 per cent in funds that hold property shares and 34.7 per cent in bricks and mortar funds.
The fund has a lower yield – 1.09 per cent – than the majority of its peers but Morrell says he always prioritises quality over income potential when looking for a fund.
"The major investment theme at the moment is that we have a bias towards quality and that is a common theme throughout the portfolio."
"Higher yielding funds might be better in the short-term, but because of possible liquidity issues and general demand for prime assets, we wanted exposure to higher-quality property."
"Property as an asset class isn’t perfectly correlated with wider equities and fixed income markets, and helps diversification."
"Global real estate offers additional benefits because property markets are local markets – they are segmented."
"There has been increased investor appetite for real assets as there are worries over a possible inflationary environment. Although it is not perfect, property can be a useful hedge against inflation via lease structures that are linked to inflation indices."
The manager understands why investors have been scared off by physical property in recent times, but he says he maintains exposure to the sector because of its diversifying effect on a portfolio.
"One of the reasons we don’t have too much in the way of direct property exposure is because the economic environment is not conducive to strong performance," he continued.
"Returns have been rather sluggish recently. However, having direct property does have its advantages as part of our overall strategy."
"This is mainly because the returns from bricks and mortar property are weakly correlated to property shares and they reduce a portfolio’s volatility."
HSBC Open Global Property requires a minimum investment of £1,000 and has a total expense ratio (TER) of 2.2 per cent.
This weekend, FE Trustnet will take an in-depth look at investing in the property market.