Investors pass up A-REITS despite outperformance
Australian real estate investment trusts (A-REITs) are failing to attract investor interest despite thriving on outperformance against Australian and global shares, according to Lonsec Research.
Lonsec Research's Australian listed property security sector review, found that A-REITs returned an average of 11.4 per cent over the year to March 2016, and 15.8 per cent over a five year period.
Lonsec also found that global bonds returned 4.5 per cent, global listed infrastructure returned 3.8 per cent, while equities were in negative territory. Global equities returned -3.3 per cent and Australian equities returned -9.3 per cent (over the 12 months to March 2016).
While returns were stronger than other asset classes, fund inflows were weak.
Senior analyst, Nick Thomas, said: "You might normally expect that when an asset class performs as strongly as the A-REIT sector has done over the past few years, retail investors would sit up and take notice".
When Lonsec looked at the active peer group of funds, half of them experienced negative net fund flows in the year to December 2015, he said.
Thomas believed investors were perhaps more interested in global listed property or preferred more passive investment styles than A-REITs.
Although A-REITs returns outperformed over one, three and five years, its returns over 10 years were still affected by the global financial crisis (GFC) as the S&P ASX 300 A-REIT accumulation index fell 72.2 per cent from its 2008 high to its low in 2009, Thomas said.
"On one level you can understand why investors may still be cautious, but on the other hand they may have missed structural improvements within the sector since this time."
Recommended for you
Lonsec and SQM Research have highlighted manager selection as a crucial risk for financial advisers when it comes to private market investments, particularly due to the clear performance dispersion.
Macquarie Asset Management has indicated its desire to commit the fast-growing wealth business in Australia by divesting part of its public investment business to Japanese investment bank Nomura.
Australia’s “sophisticated” financial services industry is a magnet for offshore fund managers, according to a global firm.
The latest Morningstar asset manager survey believes ETF providers are likely to retain the market share they have gained from active managers.
