Bricks and mortar and the super market

Accordingto analysis undertaken by research firmInTechcovering asset allocations over the 12 months to July 31, while some superannuation fund trustees might have been showing an increased interest in property investment, this has not translated into sizeable shifts in asset allocations.

And this lack of significant change to asset allocations comes despite listed property trusts (LPT) being rated as the best-performing asset class through 2002-03, returning an average 12 per cent over the period.

In fact, the status quo was seen to prevail across virtually all the investment settings — conservative growth, balanced growth, growth and high growth.

The fact that funds have not moved to significantly increase their property allocation also comes despite the fact that industry publicationSuper Review’srecent Top 300 survey revealed that funds with a significant property exposure had out-performed most of the others.

One of those was theRetail Employees Superannuation Trust(REST), attributing its performance to its relatively conservative positioning and the better than average performance of its portfolio managers.

“Returns for all our options this year, and over the last three years, have been strong and consistent,” says REST chief executive Neil Cochrane.

“This is because we are a value-based fund and have taken a conservative position where we have a relatively high exposure to direct property and a low international equity exposure.”

InTech executive director Brett Elvish says that notwithstanding the publicity surrounding the 2002-03 performance of funds which have a high property exposure, this has not generated discernible changes in asset allocations by other funds.

“Most funds have a relatively low allocation in terms of property — about 6, 7 or 8 per cent — and we regard that as being a prudent level,” Elvish says.

“It’s true that the funds that did best last year were those with the highest exposure to property and the lowest exposure to international equities, but that’s not something we’d necessarily be encouraging,” he says.

He suggests that some of the enthusiasm for property that existed at the beginning of 2003 has been tempered by the recovery in international equities, particularly over the past six months.

Frontier Investment Consultingagrees with the InTech analysis that there’s been little change in terms of asset allocations towards property, but remains positive about property as an investment option.

Frontier’s managing director Fiona Trafford-Walker says she hasn’t noted any significant change in attitude by funds towards property in recent times.

Trafford-Walker suggests that at least part of the reason funds haven’t moved to alter their exposure to property has been the recovery in international equities over the past six months and their recollections of the last time property slumped.

Towers Perrinhead of asset consulting, research, Dennis Sams says a number of funds have always maintained higher than usual direct property allocations, but that there’s been no discernible change on the part of other funds.

Looking at the better than average performance of funds with high property exposure last financial year, he says those funds benefited from their long-standing exposure rather than any recent decisions to increase their allocation.

Sams says there has been a good deal of discussion about the advisability of increasing property exposures, but this hasn’t necessarily translated into major changes in allocations.