Funds flowing to hybrid property funds
The average hybrid property funds rated by Lonsec this year grew in size by 14 per cent over last year to $272 million, having experienced strong investment flows during the year.
This was a key finding of Lonsec’s third annual rating of the sector, which saw three of nine rated funds receive its top ‘highly recommended’ rating.
Another key finding was that the average fund’s allocation to direct property decreased to 49 per cent this year from 52 per cent last year.
Head of property and infrastructure research Kevin Prosser attributed this to “strong competition for quality assets making their acquisition at appropriate prices very difficult”.
He predicted the fall could either lead to an increase in risk levels within the funds, as managers may need to move their listed property allocation towards their stated upper limits.
“Alternatively, some managers may cap the size of their funds to maintain asset allocation between listed and direct property,” he said.
The three funds to receive a ‘highly recommended’ rating were: Charter Hall Umbrella Fund; AMP Core Property Fund; and Merrill Lynch Combined Property Income Fund.
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