Product News 26/10 – AM rolls out hybrid property fund
Demand from advisers for flexible direct property investments has prompted AM Corporation to release a new hybrid property fund.
Property investments general manager Ian Frost says the fund, AM Property Plus, will compete with direct and fixed term property syndicates but differs from those in the way investor funds move in and out of the fund.
He says AM has termed the structure a term property unit as it offers investors the ability to move out of the fund after four years. At the same time, investors can invest in the fund at any time as properties are purchased according to fund inflows.
"This is the first product of its type since around 1990 which has allowed investors to do that," Frost says.
"We see the benefit of this approach as being counter cyclical and we can physically change the value of the fund by changing the types of buildings according to the cycles."
Investors wishing to get out of the fund before the four year limit will be able to trade the fund on the property exempt market. Frost says AM plans to list the fund on the Austock property exchange and valuing the fund quarterly.
"The result of having frequent valuations means any investors making decisions to sell or redeem are aware of the value of their investments," Frost says.
"This avoids penalising unit holders who remain in the fund and redemptions are made at a real, not historical value."
The fund will be fully invested into a mix of income and growth assets in the industrial, retail and commercial property sectors but be limited to assets worth between $10 to $30 million.
According to Frost, the fund will start to receive client inflows in late October after kicking off with $100 million to invest. Of this figure, $60 million has come from AM's balanced growth fund with the remainder coming from borrowings.
The minimum investment is $1000 through non-superannuation channels while the limit has been removed for funds entering through AM Corp super products.
So far three properties, one each in Darwin, Melbourne and Brisbane, had been signed up with negotiations taking place to add another property in Sydney.
Frost hopes this type of product will take off and doesn't mind if other providers roll out a similar offering as he feels it will add new drive to property.
"It is good for us and advisers if someone else brings one of these out. As a product, they become a more valid offering, this market will grow and investors have a wider choice when it comes to property investments," Frost says.
Hotels boost market
A strong recovery in hotel property helped the listed property trust sector outperform equity markets in the three months to September 30. The three listed property trusts focussing on hotels returned an average of 7 per cent over the quarter, after the sector being battered by low confidence over the past year. According to Ausbil Dexia, the listed property trust index rose 1.9 per cent over the quarter, compared to the S&P/ASX 200 which rose 0.55. For the year to September 30, listed property trusts rose 9.1 per cent, well down on the All Ordinaries Accumulation index which was up 17.2 per cent.
Portfolio hybrids
Portfolio Partners is to incorporate locally sourced hybrid fixed interest products in its recently launched Premier Fixed Interest trust. The Norwich Union subsidiary will use instruments such as converting preference shares to make up about 20 per cent of the fund.
Client relations manager Gregor Rennie says Portfolio Partners decided against going down the route of using offshore fixed interest as the high yielding component of the fund, arguing local instruments offered similar performance and reduced risk. Rennie says the funds will initially be aimed at master trusts and superannuation funds but may be offered to retail investors when it has two year performance numbers on the board
Credit for technology
Credit Suisse Asset Management has rolled out two new funds aimed at attracting investors seeking higher returns at the technology end of the investment market. The Global Post Venture Capital fund will seek to invest in companies which have received venture capital injections in the past ten years and will include stocks across a range of countries and industry sectors. The global new technologies fund will target the growth in the areas of telecommunications, media and technology-related industries. The fund will be managed from New York which will be reflected in its make-up with the exposure to US stocks around 60 per cent. Both funds will be available in the retail and institutional market.
BNP product rollout
BNP Paribas has added a number of new products into its range of mezzanine products, following a recent buying spree in Australia and overseas. The group is to launch two new fixed interest trusts managed by Fischer Francis Trees & Watts (FFTW), a company BNP took a stake in earlier this year. There are also two products managed by Massachusetts Financial Services (MFS) under the BNP Banner, following its acquisition of the distribution and client services rights to MFS in Australia. Minimum investment for the products is $50,000.
AUTHOR
Jason Spits
Recommended for you
Pendal has told investors it will start winding up its Enhanced Credit fund from December, its third fund closure this year.
A potential acquisition of Platinum Asset Management by Regal Partners will be beneficial for the “challenged” fund manager, believes Morningstar, but it has warned fund management mergers don’t always run smoothly.
Fund managers made a “big shift” into bond-sensitive sectors like utilities in September and away from cyclicals, while risk appetite is at an 11-month low.
Ahead of the RBA’s upcoming monetary policy meeting next week, BlackRock Australasia has reaffirmed the market’s view that rate cuts are likely out of the picture for 2024.
