Stellar growth a tough act

If the three finalists in the property securities category of this year’sMoney Management/AssirtFund Manager of the Year awards agree on anything, it is that the listed property sector is unlikely to emulate in 2002 the type of stellar performance that lifted the asset class to the top of most performance charts in 2001.

The listed property trust sector was the best performing asset class in the year to the end of February 2002, the period measured by Assirt to determine this year’s awards.

Over the 12 month period, listed property returned 14.1 per cent to investors, well ahead of the local share market, which returned 6.1 per cent, the international share market, which shrunk by 13.2 per cent and even unlisted property, which returned 9.3 per cent.

Returns from the property market were largely driven by interest rate cuts, with performance also boosted by the flight of many investors to more conservative asset classes, as returns from equity markets began to look uncertain.

According to Assirt, the flow of funds from retail investors into property trusts jumped from $79 million in the three months to June 2001, to $181 million in the three months to September, to almost $350 million in the three months to December.

The strong performance of the sector as a whole helped UBS Global Asset Management return slightly more than 22 per cent for the year to the end of February to take out the award for the best property securities manager in this year’s Fund Manager of the Year competition.

The manager’s strong outperformance for the year was anchored by its mid-cap bias in property securities, as well as its total lack of exposure to infrastructure assets in its property portfolio.

But UBS, along with the other finalists — BT Financial Group and Credit Suisse Asset Management — is predicting much more subdued performance from the sector in 2002.

“If you believe that growth rates will increase and interest rates will be on the rise, then it will be difficult to see property outperforming other asset classes,” UBS executive director and deputy head of equities John Snowden says.

“But if you think that economic conditions are still variable, then you have to conclude that the performance of property will remain competitive. We are forecasting that the property sector will return about 11 per cent in 2002.”