Property performance record hits volatile times

Looking at the leaders in property securities in terms of funds under management (FUM) over the last four years is not exciting reading. The same funds appear at the top of the list:MLC, Deutsche Paladin, APN,Colonial First State, andWestpac. A bit of jostling for position, but no real upsets.

On the other hand, closer examination of the top performers in this asset class reveals a veritable kaleidoscope of players.Australian Unitytops the list in 2000 with its Property Securities fund at 34.4 per cent, then is pushed aside byUBS Global Managementwith 21.5 per cent in 2001, which is in turn ousted by BT’s Property Securities fund at 16.1 per cent in 2002, and newcomer Zurich Listed Property Blended fund at 12 per cent in 2003.

According toAssirt, the period between 2000 and 2003 was a particularly eventful one for the property area, ‘rocking the boat’ and creating more volatility in the sector.

The major influence on this period was the equity market correction in 2000 and 2001, followed by a period of excellent relative performance in 2001 and 2002.

Assirt Research says: “Following that in 2002, property benefited in terms of inflows, with lots of people losing faith in equities and putting their money in listed property trusts (LPTs).”

The period was also characterised by structural changes to the LPT sector, with considerable consolidation and the large trusts getting bigger. Increasing overseas investment, due to the securitisation of most Australian properties, was another feature of the period.

Zeroing in on some of the movers and shakers in the sector, Australian Unity’s Property Securities fund, although a leader in terms of performance, did not see the same exuberance from the market in inflows or FUM.

Benefiting from a ‘manager of managers’ approach, it was a solid performer for the whole 2000-2003 period, with returns ranging from 34.4 per cent to 8.4 per cent keeping it in the top 10 funds on performance. However, the fund experienced outflows between 2000 and 2001, slipping from fifth in the property top 10 in terms of FUM in 2000 to eighth in 2001 with $67.42 million.

The UBS Property Securities fund showed constant good returns over the period, moving from position 10 in 2000 to top the table in 2001 with a return of 21.5 per cent, and was among the top five funds in 2002 and 2003. Inflows for the fund increased from $30.53 million in 2001 to $181.52 million in 2003, also resulting in the fund reaching third in the sector for FUM in 2003, with $397.1 million.

Other top performers from 1999 and 2000 simply fell off the top 10 radar in terms of FUM, inflows and performance in later years — including funds from the Commonwealth, Credit Suisse and ING.

However, this is partly a function of an overall increase in levels of FUM and inflows for the biggest players in the market over the four year period, due to consolidation.

With many of the largest funds, such as Colonial First State, MLC and the Deutsche Paladin property fund, their performance may have waxed and waned, but they have retained their top positions in terms of inflows and FUM — showing that size in itself can attract investors and keep them.

APN Property for Income, which has topped inflows for the last three years and pulled in $353.37 million in 2003, rewarded investors who were undeterred by a dip in 2002 in its otherwise consistently good performance, taking positions two and three in the performance table for 2003 with the fund itself and an offering through Skandia.

BT’s Property Securities fund held a top 10 position in terms of FUM between 2000 and 2002 on the back of good performance — with the fund achieving the best returns for the sector in 2002 — but suffered a setback in 2003 with the resignation of listed property head Carlos Cocaro and property analyst Damien Barrack.

This resulted in rating downgrades from some of the research houses, but the fund still managed to be among the top 10 performers in 2003, although it registered net outflows for that year.