Personal Finance: Brian Tora's Column

INVESTING IN property suddenly seems to be the new fashionable way of diversifying your savings. It is not that surprising. Share prices have been surging ahead for years but have just started looking tired. What better time to look at alternatives than when the talk is of a possible stockmarket crash?

Investing in property has never been that easy, especially for the smaller investor. As a sector it has not delivered spectacular returns. Moreover, individual share prices fluctuate around the value of the underlying property assets - a bit like investment trusts. Remember, too, that in property there are investment companies and development companies, and without care you could end up with a riskier investment than you expected.

As it happens, there are investment trusts that specialise in property. Four to be exact. One even gives access to the French market. But generally they hold property company shares, although the daddy of them all, TR Property - worth pounds 300m - does have a quarter of its portfolio invested in real bricks and mortar. In a way, you are passing the problem over to a professional manager. Not necessarily a bad move, but probably not helping you get closer to underlying opportunities.

An alternative is, of course, unit trusts. These generally concentrate on the shares of property companies. It is easy to understand why. Property is notoriously illiquid. It hardly suits the unit trust world, where a seller's need to be paid cash is of paramount importance.

Still, there have been forays into this market, though some have come to grief. I remember one unit trust in which dealings first had to be suspended and then the fund liquidated. That is the trouble with property. Placing an unwanted bedroom on the market is not an option.

Recently we have seen "buy-to-rent" schemes on the market. On the face of it these seem quite attractive. The vendors suggest that you can pay for the cost of the mortgage through the rental income. In practise you are heavily dependent upon the buoyancy of the residential property market. And, of course, this type of property is just as illiquid as any.

Portfolio Fund Management has come up with an interesting idea, launching the Portfolio Property Fund with pounds 50m of seed money. Around three-quarters will be invested in commercial property, the balance in property shares and other investments, giving some protection to investors who wish to withdraw.

More important, Liberty has agreed to buy back up to pounds 25m of the fund from investors who want out. It may not be enough if there is a real run on the market, but it should comfort those who believe that unit trusts investing in property will suffer liquidity problems.

With a yield of over 6 per cent, you realise why many are looking at property. In times of volatile markets, and with low returns from gilts and equities, it looks like a case of one or two eggs from your basket in the interests of diversity. You might even make money.

Brian Tora is chairman of the Greig Middleton Investment Strategy Committee