Thames River says property stocks still in peril

By Sinead Cruise

LONDON (Reuters) - Stock-buyers are back in love with high-flying European property shares even though more market drama looms large over the debt-sensitive sector, a real estate hedge fund manager at Thames River Capital told Reuters.

The inevitable withdrawal of monetary stimulus and the niggling potential for economic relapse are holding the recent bull-run to ransom, making it tougher for hedge funds to implement alpha-seeking strategies, manager Christian Roos said.

"Make no mistake. We're still in a beta market. It's about owning the market or not owning the market in our subspace," said Roos, who manages Thames River's Longstone Fund.

Alpha returns are those generated by management skill, while beta returns are those driven by broader market movements.

"Volatility has been running at 45 percent on real estate securities up until the summer, almost in line with the banks. We are a sub-sector of financials. The credit instability that comes with that is in the fabric of our industry," he said.

The FTSE/EPRA NAREIT Europe index, which tracks Europe's biggest property firms, has surged on signs of stabilisation in global capital markets, rising by about 40 percent since July.

Data from research house Data Explorers shows the volume of property shares outstanding has fallen by 46 percent in the past year, implying thinner appetite for short-selling as bricks and mortar prices start to rise for the first time since mid 2007.

Short-sellers borrow shares of companies, usually from other shareholders through a brokerage, and then "sell" these shares in the hope to buy them back at a lower price later.