Peer group ratings remained relatively stable. One ‘On Hold’ rating was resolved and one fund rating outcome is pending. Five headline funds were reviewed, which included active and passive, currency hedged, and unhedged funds.  

“There were no five-star rated offerings in the rated peer group, but manager and fund quality across the rated peer group remains high, as indicated by the number of three- and four-star ratings and no funds with ratings below three stars,” said Peter Ward, analyst at S&P Fund Services. 

“The rating action taken to resolve the ‘On Hold’ rating on the AMP Global Property Securities Fund reflects a lowering of the pre-‘On Hold’ rating from four stars to three stars. The rating outcome was driven by significant investment team changes that have occurred in recent months. These changes have tempered our previous level of rating conviction associated with the capability,” said Mr Ward.

 23 July 2012

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There were three funds reviewed, which included one conventional mortgage fund and two high yield mortgage funds. The Latrobe Australian Mortgage Fund Pooled Mortgage Option has again been rated four stars, the highest rating in the S&P rated mortgage fund peer group.  

“The rating outcomes of three stars and above reflects S&P’s conviction in each manager’s investment capability and their ability to manage: investment team continuity, liquidity and redemption provisions, lending competition and margins, portfolio credit quality/arrears and defaults, and fees,” said Peter Ward, analyst at S&P Fund Services. 

“The rated funds have continued to deliver on their objectives to provide regular income distributions to their investors and have maintained capital stability in an environment where substitute products remain competitive from a risk and return perspective,” he added.

12 June 2012

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The S&P/ASX 300 AREIT Index shrunk in terms of both constituents and market capitalisation during 2011. 

S&P fund analyst, Peter Ward said: “Overall, we find A-REIT fund managers investing in A-REITs that now have generally more conservative, real estate-focused management, stronger balance sheets, lower exposure to offshore assets, and greater reliance on rental cash flows than was the case in preceding years. In the words of one A-REIT fund manager, ‘boring is the new black’.” 

“As well as focusing on the real estate opportunities that many A-REITs are well-positioned to take up, active A-REIT fund managers are looking to take advantage of other sector changes, including corporate activity, which some funds benefited from during 2011. A-REIT initiatives can also include divestment of non-core real estate assets and share buybacks to improve shareholder value,” said Mr. Ward. “Sector headwinds prevail, however, with ongoing global macroeconomic issues contributing heavily to an uncertain investment environment,” he added.  

Key themes discussed in the report are: 

• S&P awarded its first five-star ratings in the A-REIT sector in over five years. BT Property Investment Wholesale Fund and BT Property Securities Wholesale Fund both received five-star ratings.
• APN Funds Management, Legg Mason Asset Management, and UBS Global Asset Management all experienced significant investment team changes in the past year, while AMP Capital decided to bring the management of its global property securities capability in-house. The changes at UBSGAM and AMP Capital resulted in their respective fund ratings being placed ‘On Hold’.
• Antares Capital Partners (formerly Aviva Investors Australia) was acquired by National Australia Bank in October 2011. No rating action was taken.
• The S&P/ASX 300 A-REIT Index outperformed the broad equities S&P/ASX 300 Total Return Index by over 9% for the year to Dec. 31, 2011, but it trailed the S&P ASX 300 Accumulation Index equities by almost 13% over five years.
• The Australian property-securities sector performance over the year to Dec. 31, 2011, was disappointing, with the S&P/ASX 300 A-REIT Index reporting -1.56%.
• Benchmark-unaware funds benefited from their structural underweight positions to Westfield Group which underperformed other A-REIT stocks.

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Overall, peer group ratings remained stable with just two rating changes. 

There were 15 headline funds reviewed, which included benchmark-aware and benchmark-unaware funds, together with one index strategy. S&P upgraded two funds managed by BT Investment Management Ltd., to five stars. These are the only five-star offerings in the peer group and the first five-star ratings awarded in this sector in over five years. 

“This reflects our very high conviction in the capabilities of the team and the effectiveness of its A-REIT investment approach, which has proven consistently successful through a variety of markets, and importantly, we expect this to continue,” said Peter Ward, analyst at S&P Fund Services.

“Manager and fund quality across the peer group remains high, as indicated by the number of four-star ratings, although four of the seven four-star rated headline funds are managed by SG Hiscock and Company, another high quality manager,” he added.

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His replacement is David Kivell who joined PREI at the end of January to allow a short handover period with Mr Hayes. 

“S&P is familiar with Mr. Kivell from his previous roles at CBRE Global Real Estate Securities and Macquarie Funds Management,” said S&P fund analyst Peter Ward. 

“While Mr. Kivell is an experienced listed property investor and portfolio manager, we consider Mr Hayes’ departure to be a material loss, as he was a founder of the PREI business and established its domestic and global real estate platform,” said Mr Ward.

“Mr Hayes’ industry experience, portfolio-management experience and skill, and ownership interest in the business have in the past underpinned our assessment of this fund.” 

The fund is under review as part of our current Australian Property – Listed sector review. During this review, we will meet with Mr Kivell and seek to resolve the ‘On Hold’ rating.

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The ACPF is a diversified fund-of-funds that invests in listed and unlisted property funds that are predominantly managed by AMP Capital Investors (AMPCI). 

The ACPF provides investors with access to three of AMPCI’s well-diversified wholesale unlisted property funds—the AMP Capital Shopping Centre Fund, the AMP Capital Wholesale Office Fund, and the AMP Capital Hedged Global Direct Property Fund—which are managed AMPCI. These funds invest in quality real estate portfolios, primarily holding office and retail properties located in Australia and overseas. 

The ACPF also invests in AMPCI’s Global Property Securities Fund and the BlackRock Property Securities Index Fund, which are both rated four stars by S&P. 

“AMPCI’s real estate investment capability is considered to be a core competency, and this underpins S&P’s conviction,” said S&P Fund Services analyst Peter Ward. “In particular, we believe that the underlying unlisted property funds are well positioned to take advantage of opportunities, and to weather challenging conditions,” said Mr Ward.

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