Russell cools to Australian LPTs

THE mood for domestic listed property has continued to cool, with the Russell Investment Group halving exposure to the sector in its diversified funds and directing the money to offshore property securities because of what it calls “stock-specific risk” in the local market.

The changes mean that international listed property trusts (LPTs) now account for 5 per cent of Russell’s diversified fund, and 3 per cent of its balanced and growth funds.

These funds are chiefly sold by planners from Professional Investment Services, through the ‘Ventura’ alliance, and planners from Genesis Wealth Advisers (formerly Associated Planners) through the ‘Foundation’ alliance.

The new allocation has been outsourced by Russell to three managers — value manager AEW Management, which gets 35 per cent of the allocation, Invesco Institutional, which will manage 35 per cent and Morgan Stanley Investment Management, which takes on 30 per cent.

The move comes a week after research group Zenith Investment Partners backed global listed property, but warned about the prospects of the domestic LPT sector.

AMP Capital Investors has also recently launched a global LPT fund for retail investors to take advantage of growing interest in the sector.

Russell’s chief investment officer, Peter Gunning, advised investors to reduce their portfolios’ exposure to Australian LPTs to about 5 per cent, and put 3 to 4 per cent into an ex-Australia property securities, which he said behaved similarly.

This would result in a roughly even split between domestic and offshore allocation, owing to the large global exposure within existing Australian LPTs.