REITs beat index despite poor performance
All but one Australian REIT manager has beaten the index over the past 12 months despite global economic uncertainty and a slow improvement in REIT fundamentals negatively impacting on active global REIT manager performance, according to Zenith's latest research.
Zenith investment analyst Quan Nguyen said a trend towards passive portfolio construction had emerged over the past 24 months due to global economic uncertainty and sovereign issues in Europe.
This is the reason most active global REIT managers underperformed the Vanguard International Properties Securities Index Fund (hedged) for the third consecutive year, he said.
However, Nguyen said the Australian REIT sector was well positioned compared to the broader equity market because low demand was being offset by rental growth improving or at least matching inflation, and interest rates were coming down.
"Over the last 12 months, the Australian REIT sector has more than comfortably outperformed the broader Australian stock index," he said.
He also said correlations between global property funds and other sector benchmarks were low, which indicated the continuing diversification benefits REITs offered in a portfolio.
From 53 property funds, Zenith rated five "highly recommended" including BT Wholesale Property Securities Trust, UBS Clarion, Zurich Investments and Resolution Capital Global Property Securities funds, and a further 13 were rated "recommended".
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