FMOTY 2023: Spotlight on global property
The finalists of the Global Property Securities Fund category at the 2023 Fund Manager of the Year Awards have shared their insights with Money Management.
The finalists in the category are:
- Ironbark Global Property Securities Fund
- Quay Global Real Estate Fund — Unhedged
- UBS CBRE Global Property Securities Fund
Click here to view the full list of finalists.
These fund managers believed that, while 2022 might’ve marked one of listed property’s less successful performances, the asset class is now well positioned for earnings growth in 2023 and 2024 and the winners won’t rely on cheap capital for sustainable growth.
“Earnings today are significantly higher than 18 months ago, and the operating outlook is encouraging, yet on average share prices are lower,” explained Justin Blaess, principal and portfolio manager, Quay Global Investors.
“One of the side effects of higher interest rates is that construction and hence supply in almost all real estate sectors has ground to a halt. This will mean that through economic growth and as businesses, that as the tenants across the various commercial real estate asset classes continue to grow, their demand for greater space will cause vacancy rates to tighten up.
“This ultimately gives the landlord leverage in rent negotiations and leads to accelerating rents and most likely renewed investor enthusiasm for real estate.”
He attributed the fund’s nomination to its index unaware approach, with an active share consistently above 80 per cent; being adequately diversified “but not overly diversified” and strong investment process.
Reflecting on UBS CBRE Global Property Securities Fund’s performance, CBRE Investment Management portfolio managers Justin Pica and Ken Weinberg said it had added 170 bps of value compared to the benchmark in the first quarter of 2023.
“Over the last five years, we’ve added 291 bps of value. We continue to see opportunities for active management in a niche sector like real estate, where we can derive insights from our broader public-private research platform, and our specialised research analysts can uncover companies at discounts to private market values and with upside to consensus expectations,” they said.
Like Blaess, the CBRE portfolio managers hold a positive outlook after a challenging 2022.
“2022 marked one of the worst performances for listed property on record and we lagged the private markets by nearly 30 per cent. Traditionally, when this has happened, it’s led to ~18 per cent annualised forward returns in an ensuing three-year period,” they explained.
“We see the potential for that today, with the asset class well positioned in earnings, which should grow in 2023 and 2024; dividends, which should similarly follow; and balance sheets, which are quite strong relative to history.”
Alison Telfer, country head, UBS Asset Management Australasia, added: “The UBS/CBRE partnership on the Global Property Securities Fund combines the strength of our global and local product platform with the investment skills of the global CBRE team, allowing us deliver for investors in that fund since 2006.”
A spokesperson for DWS, who manages the Ironbark Global Property Securities Fund, said that across the public real estate landscape, healthy but moderating fundamentals across select real estate sectors continued to be balanced by slowing global growth and higher costs of capital.
The fund had a strong track record of outperformance over the short and long term, having outperformed the benchmark over three, five, seven, and 10 years.
An Ironbark spokesperson added the fund had successfully outperformed the FTSE EPRA NAREIT Developed Rental Index (hedged to Australian dollar, total return, net of withholding tax) over the three years to April 2023.
“Managed by the DWS Group since 2004, the fund benefits from a large, experienced, and market-savvy investment team that leverage a vast array of proprietary research resources to identify inefficiently priced property trusts and property related companies from around the globe,” an Ironbark spokesperson told Money Management.
“We believe that DWS’ detailed and highly structured investment process is a key contributor to the fund’s nomination for this award, a process that benefits from the on-the-ground research of local specialists who understand regional dynamics and a top-down overlay of strategic allocation and risk management.”
Winners of the 2023 Fund Manager of the Year Awards will be announced on Thursday 22 June 2023 at a black-tie gala awards ceremony at The Star in Sydney.
AUTHOR
Rhea Nath
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