FUND VIEW-Volatility makes property stocks funds a hard sell

By Sinead Cruise

STOCKHOLM (Reuters) - Property equities funds could see capital inflows dramatically curbed if volatility in global real estate shares continues to grow, the head of Fidelity's $250 million (142 million pounds) Global Property Fund told Reuters.

Steve Buller said volatility had reached disturbing levels, making it hard to promote real estate as a defensive asset class.

"When we started running the U.S. REIT (real estate investment trust) fund in 1998, there was very seldom a day when the REIT market would move 20 or 30 basis points either way.

"Now we see intraday movements in stocks or even indices of 8 percent. This is a dichotomy to the underlying business," he said in an interview on the sidelines of the European Public Real Estate Association EPRA.L conference.

Buller said the surge in real estate stock market volatility was making it harder for funds to stick to longer-term strategies.

On average, he said Fidelity looked to hold stocks for between 18 months and five years, leading to a annual turnover of stocks of between 20 and 40 percent.

But sharp price movements in either direction meant the fund was being forced to trade more frequently, either to exploit volatility or defend against it.

"The real estate sector has more volatility than technology stocks and technology is a short-term, non-cashflow business, where products can have six month's shelf life," he said.