A-REIT sentiment down, says Russell

A-REIT sentiment is down due to increasing interest rates, according to the latest Russell Investments Investment Manager Outlook.

The survey of 44 leading Australian fund managers revealed that the sentiment towards A-REITs was “dismal”, with the bearish view towards A-REITs almost doubling from 23 per cent to 42 per cent despite the ongoing economic recovery.

“Although Australian real estate trusts have taken large steps to deleverage their balance sheets through 2009, they still remain relatively highly geared and sensitive to increases in interest rates,” said Russell Investments’ associate portfolio manager Scott Bennett.

The increase in interest rates has also resulted in a shift towards cash away from Australian bonds. The survey stated that 71 per cent of investment managers were bearish about the outlook for Australian bonds over the next 12 months.

However, over half the fund managers expect double digit returns in 2010, with a growing number of Australian fund managers adopting a bullish outlook for domestic shares in 2010 — 73 per cent are bullish and 54 per cent expect the local market to grow by over 10 per cent in 2010.

The survey stated that fund managers largely see the local share market as fairly priced, although there is a minority of 16 per cent who see it as overpriced. The number that saw the market as cheap has fallen from 59 per cent in March to 18 per cent in December.

“Managers appeared unmoved by the recent stall in Australian share performance. Longer term expectations are firmly focused on the positive prospects for our market and its fundamental resilience,” said Bennett.

The survey also showed that opinions about the direction of the Australian dollar were mixed, with 38 per cent of respondents predicting no further increase in the dollar with the same percentage predicting more growth.