Investors told to consider Australian real estate securities

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Investment advisers whose clients are looking for income and diversification without too much volatility should consider Australian real estate trusts, one fund manager says.

Wednesday, September 4th 2013, 3:52PM 2 Comments

by Susan Edmunds

Pete Morrissey is APN Fund Management’s fund manager of Real Estate Securities in New Zealand.

APN is an Asia Pacific real estate fund manager that manages funds on behalf of institutions, super funds and retail investors.

Its APN AREIT Fund predominantly invests in Australian listed property securities and has a current running yield of 7.71%, with a fund size of A$458.47 million.

The yield is what investors receive in their hand via the monthly distribution payments.  The fund has a MER cap of 1.05% based on the net asset value.

The minimum investment is A$1000. Advisers are paid up to 0.2%.

Morrissey said New Zealand trusts had done well because they were supported by retail investments but there were impediments in the Kiwi market because of its size and the ability to diversify.

That prompted some Kiwi investors to look offshore, particularly to Australia, because they understood a lot of the companies that were listed there and were familiar with Australian property.

He said the yields between the two markets were not very different but there was a far greater range of Australian stocks and the market cap was much higher.  “The dominance of Westfield is similar to larger trusts here but there’s more choice down the pecking order.”

It would suit an investor with a primary focus on income, he said. “Investors should be aware that the reason you have real estate in a portfolio is primarily income. You should experience CPI levels of capital growth.”

That would result in less volatility, he said.

Over recent years New Zealand property trusts have outperformed Australia’s but Morrissey said that was a byproduct of the global financial crisis, to which Australia was more exposed. “They were focused on growth to their detriment and went into the GFC highly geared.”

Into the future, investors could expect a higher return from Australian investments, he said.

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