Property funds are different from most listed companies. This is why an issue is made of the fact that the sector's market capitalisation, at R28bn, is R2bn more than the R26bn net value of the portfolio of properties that they own.

A market price within 8% either way of net asset values (NAV) is neither here nor there in most sectors.

But property funds are little more than a collection of actual physical properties, each of which provides long-term income, as most properties do. They were listed on the JSE with one primary objective: to make an illiquid asset class liquid by giving it tradable shares.

Liquidity has created jobbing opportunities and infected the sector with the current short-term obsessions.

But investors who concentrate on short-term performance, as they do with other companies, could miss the real opportunities in the sector.

With the growing popularity of property shares, some commentators say the premium to NAV means the sector is now overpriced. Others, like property consultant Niki Vontas, say the shares are underpriced if you value the property portfolios on forward yields.

This argument matters because historic yield and the premium or discount to NAV are among the few pieces of information readily available to private investors when they decide to buy into property funds, says independent analyst Liliane Barnard.

There's not much with which to navigate the long term, while calculating NAV relies on professional valuations.

Redefine, the hybrid fund that invests in property and other listed funds, offers an instructive example of how this can work. It announced its annual results at a press lunch last week at 2 Arnold Rd, Rosebank - offices it bought from Corpcapital for R22m earlier this year.

That was a steal, said many, because Corpcapital had bought the super-luxury development from Anglovaal for R32m three years before, and had spent about R5m on improvements. Before that, Anglovaal had ploughed R54m into its construction in 1995.

"No danger of this property's value being written down, then," cracked a respected senior journalist nestled among the plush finishes. "On the contrary," retorted Redefine director Marc Wainer, "the valuer wrote it down to R16m."

But there are sound reasons for such a write-down, says Vontas. "In 1995, prime rents in Rosebank were R85/m², the highest in SA. They have since fallen steadily below R60/m² as the suburb lost favour," he says.

Over that time, listed property loan stock company Atlas has halved the values of its properties at nearby 8 Arnold Rd and 17 Baker St. But Grayprop has mysteriously raised the value of its Rosebank Corner property from R31,5m to R36,5m, while vacant space remains virtually unchanged at 24% and losses were reduced.

Wainer complains that there is no universal standard of valuation followed by all funds. A common standard would make it more practical to compare one fund to another. Risk-rating the portfolios could be another way of helping investors decide which counters to buy.

Adds Vontas: "Relying on NAV is clutching at straws."

But, counters Wainer, the private investor does not have the above information readily available. "NAV can be a rough guide," he says.

For instance, Paraprop has been at a substantial discount to NAV because of a financial structure that has nothing to do with the performance of the properties but has burdened it with constantly diluting share values.

In two years dilution ends and income starts increasing. At 320c earlier this year, the Paraprop share looked like a bargain; now it's 420c. But "this sort of increase is unusual in property, which is far steadier than other listed sectors", says Wainer. "The private investor buys for income and its growth. As long as he gets that, he can ditch NAV."

Recent history shows another useful rough guide for private investors. They should get better growth in the medium term from the hands-on managers who are replacing and outperforming the institutional thinking that ruled the listed funds in the 1980s and 1990s.

Investors should look at stables like Corovest, which manages Sycom and Aprop; Spearhead; the Wapnicks, who manage Premium and Octodec; and Madison, which has grown into a R10bn fund manager with Redefine, Hyprop, ApexHi and Prima.