The property sector was a tough one for fund managers and investors during the year. First it was popular as a defensive haven during the Asian crisis, particularly because of the strong yields on offer.

However, by year's end the sector was firmly out of favour as investors switched out of dividend story stocks back into ones that could leverage off the emerging, but fragile, economic recovery.

NZ Funds Property and Infrastructure Trust had an advantage over the pure property plays as it has the ability to invest up to 30 per cent of its funds in Australia and it takes a broad interpretation of infrastructure.

As a theme it includes telecommunications and electronic infrastructure, along with energy, fuels, airports and transport, banks and information providers. This interpretation is reflected in some of the stocks held during the year, such as Telecom, Sky TV, Telstra, Baycorp, E*Trade and Computershare.

The major holdings this fund had a degree of similarity with the NZ Funds NZ Equity fund.

FundSource says the aim of this trust is to provide an attractive and reliable income stream to investors wanting exposure to real assets.

First runner-up, Armstrong Jones Property Securities Fund, invests mainly in property trusts listed on the New Zealand Stock Exchange with one exception. During the year Auckland International Airport (AIA) was included in its portfolio on the basis most of the company's revenue streams are similar in nature to property.

Investment manager Amanda Smith says including AIA is an isolated situation and AJs is not trying to change the fund. She says AIA earns a lot of its income from rentals and from its shopping centre, plus it was had a substantial land bank.

The fund's main calls were its overweight position in St Lukes (34 per cent), Kiwi Income Property Trust (23 per cent) and Property for Industry (9 per cent).

The listed property trust expanded during the year with the floats of Capital Properties and the Colonial Property trust, however these stocks haven't been bought by AJ.

Smith says the outlook for the sector is reasonable, however not as good as the broader market.

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