Listed property dominates over long term
Listed property returns have exceeded the All Ordinaries over the last two decades with much less volatility, according toCredit Suisse Asset Managementinvestment manager David Scott.
Scott heads up the property investment team at CSAM and says research conducted by his team demonstrates that over the last 19 years listed property investments have returned 14 per cent while the All Ordinaries benchmark returns were 13.7 per cent.
At the same time, volatility for listed property investments averaged at 13 per cent while the All Ordinaries benchmark was above 19 per cent.
“This type of performance is not getting any headlines due to the general gloom surrounding equities. Yields and growth are still increasing in property so it is still an attractive market looking forward as well,” Scott says.
“The reason for this is that the fixed interest cycles are over and interest rates have dropped substantially so property should remain good for some time.”
Other reasons why listed property should remain strong, Scott says, is that most trusts are well managed and diversified, with a range of assets and tenants, as well as the absence of new equity floats.
“There has been a limited amount of new building entering into the market but supply and demand have remained consistent with vacancy rates around five to eight per cent in the major cities,” Scott says.
“The higher figure is a short term issue linked to the economy but it is unlikely there will be a property collapse as these usually occur due to an oversupply of property.”
Scott says the figures highlight a return to performance for listed property and says that lower quartile, median and upper quartile managers in the market have outperformed the S&P/ASX 200 benchmark over three months and one, two, three and five years.
He says it is becoming harder for listed property trusts (LPT) funds with large scale to perform as well as smaller LPT funds due to the difficulty of larger funds to respond quickly to market changes.
However, listed property is still a better investment than direct property according to Scott, as direct property must be accessed either by syndicates, directly by the investor or through wholesale funds.
Direct property also leaves investors open to liquidity issues, and problems with the diversification of investment opportunities, gearing and stamp duty, all of which can be avoided by investing through LPTs.
AUTHOR
Jason Spits
Recommended for you
Commentators have said Australian fund managers are less knowledgeable compared with overseas peers when it comes to expanding their range with ETFs and underestimating the competition from passive strategies.
VanEck is to list two ETFs on the ASX next week, one investing in residential mortgage-backed securities and the other in Indian companies.
Perpetual outflows have risen by 134 per cent from the previous quarter as the result of client mergers and rebalancing including $2.5 billion in outflows at Pendal Asset Management.
ClearBridge Investments has expanded investor access to its global infrastructure investment strategies through the launch of three active ETFs on the ASX.
