Zenith review favours global property trusts
Zenith has completed its 2009 property sector review, adding a total of 14 global and domestic property funds to its 'recommended' list, with global funds the standout.
From a total of 62 funds, three global funds were rated 'highly recommended' and a further 11, six of which were global funds, were rated as 'recommended'.
The list includes five new global property funds and a focused reduction in domestic property funds, according to Zenith.
Commenting on the recapitalisation of global and domestic real estate investment trusts (REITs), Zenith investment analyst Andrew Cassar said, “Over the past 12 to 24 months, a majority of global and domestic REITs implemented a range of strategies to strengthen their respective balance sheets and reduce debt/equity ratios, from approximately 60 per cent at its peak to circa 53 per cent".
The company continues to reduce its domestic listed property trust exposure following a disastrous year in 2008, highlighting the lack of depth and diversification in the Australian market, according to senior investment analyst Ben Davis.
“Zenith has been a strong advocate for investors increasing their allocations to global property since our initial property sector review in 2006, and the benefits of the sector have been continually highlighted in subsequent reviews,” Davis said.
“Importantly, over recent years the number and quality of global property offerings has also improved. In our view, this further increases the appeal of allocating to the sector,” he added.
“Ultimately, this change in the opportunity set in what this sector represents provides the potential for investors to reshape their property allocations. While we acknowledge that Australian [listed property trusts] have some attractive characteristics, we do not believe 100 per cent domestic exposure is the optimal approach in this sector,” he concluded.
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