Renewed adviser interest in property, says Charter Hall
|
|
Investor and adviser sentiment towards property investing will improve as fund managers learn the lessons of the global financial crisis (GFC), according to Charter Hall.
The chief executive of Charter Hall Direct Property, Richard Stacker, said various issues revealed during the GFC, including liquidity and gearing, damaged the reputation of fund managers and investor sentiment towards the sector in general. But he said Charter Hall was seeing renewed interest in its offerings from advisers, mostly those dealing in the high-net-worth, self-managed super fund sector.
Charter Hall has launched a new industrial property fund in response to increasing demand for high quality property investments, and Stacker said the fund had also taken into account the fact that investors were looking for defined investment mandates, conservative gearing and certainty around exit mechanisms.
Stacker said increasing demand was shown in a recent survey by Rainmaker, which revealed that 24 per cent of 700 advisers stated they planned to increase their clients' allocation to property, with a preference for Australian property (51 per cent).
However, he said there is still confusion among financial advisers about property and how it should be allocated in a portfolio.
"Some still want daily liquidity from direct property, which is unrealistic," Stacker said. He added that one of the lessons learnt during the GFC was that direct property is illiquid, regardless of whether an investor was invested in a hybrid type fund, which included property securities.
"But the majority have moved on to understand that some funds can probably have some liquidity, although it's very limited."
He said asset allocation in the property space traditionally was somewhere between 10 and 15 per cent, which was split between direct and listed. However, volatility had created uncertainty.
"Advisers like the liquidity of REITS [real estate investments trusts], but don't necessarily like the volatility," Stacker said. "They are getting that balance with unlisted property, but they need to be comfortable."
Stacker added that financial planners were also becoming more aware that the gearing had to suit the actual asset.
"Long-term leases can probably have of a bit higher gearing, but for short-term leases, definitely not," he said.
Stacker conceded that there are legacy issues off the back of frozen funds, which is the biggest issue the sector is dealing with at the moment, along with failed managers.
"Even in the listed space, that confidence in liquidity is not there at the moment," he said.
Stacker added fund managers were going back to basics.
"They understand that a building in a good location, with a good tenant and good lease, is what investors really want to get into - consistency, income returns and some capital growth."
Recommended for you
Asset managers may be encouraged to diversify their product ranges and branch into the retail or intermediary market but, two consultants argue, they may find it more complicated and costly than they expect.
The US$837 billion fixed income manager has created a new head of asset-based finance role amid the rising client demand for asset-based financing and tailored investment solutions.
Platinum Asset Management has rejected a bid from PM Capital to acquire its two listed investment companies.
Money Management understands Natixis Investment Managers is planning to launch its own private asset product for the Australian retail market.
