Global property outperforms global equities
Research house Lonsec said global listed property had outperformed the majority of major asset classes during 2012, driven largely by investors seeking yield and a general preference for defensive sectors.
The Lonsec Global Property Securities Fund Sector Review said while fund performance has been impressive in an absolute sense, relative performance has been somewhat disappointing. Both major property securities indices delivered returns in excess of 25% over the year, having rebounded from the lows experienced during the global financial crisis; however the majority of managers underperformed their respective benchmark indices over the past year.
“The sector has been the beneficiary of a generally low growth environment, with investors seeking out higher yielding investments from defensive sectors. Global property securities outperformed global equities by 8.6% over the year to November 2012, and by 8.7% p.a. over a three-year period. Both major property securities indices delivered strong returns over the year, having now rebounded strongly from the lows experienced during the global financial crisis,” said Andrew Coutts, Senior Investment Analyst.
“Like-for-like performance comparison between funds remains difficult, since a number of funds are benchmarked to different indices” he said.
The Lonsec Review found overall portfolios were generally defensively positioned, with managers tending to favour large cap, high quality names. It identified that this bias in portfolios is also reflective of the significant divide that has opened up between the major REITs and their smaller counterparts.
“In general, larger REIT players are thought to be better positioned from a risk perspective relative to their smaller counterparts. This is due to better access to funding at more attractive pricing – with lenders having adopted more stringent lending criteria – and the tendency for high quality property to be more resilient in periods of economic difficulty.
“With macro uncertainty prevailing, fund managers were not taking material regional bets but instead focusing on stock selection. Many are ‘sticking to their knitting’ and focusing on bottom up research in the hope of achieving better relative results by being in the right companies rather than taking large bets on sectors or regions.” Mr Coutts concluded.
