‘Listed Property shines again, but be aware’, says Zenith.

Mon, 18 Jul 2016 21:35:52 +0000

Sophie Gibbons

The Listed Property sector achieved yet another year of strong absolute returns, with Australian and Global REITS generating 15.6% and 4.2% respectively, over the 12 months to 31 May 2016 according to Zenith Investment Partners latest Property Sector Review.

This contrasted with other mainstream asset classes, many of which faired less favourably amidst a period of broader market weakness.

Across Zenith’s universe of rated managers, investment outcomes were varied with sector participants citing headwinds that made it incrementally challenging to generate excess returns.

Included amongst these were distortions brought by central bank policy, valuations and issues with benchmark composition.

Sophie Gibbons, Zenith Senior Investment Analyst said “We have observed a greater willingness of AREIT sector participants to use the full breadth of their investment mandates this year, largely in an effort to generate excess returns. These have included the incorporation of developers & contractors, as well as infrastructure and small caps into the investment universe.

Investors need to be aware that these exposures can potentially provide a more varied set of investment outcomes that may not directly reflect the defensive nature of the asset class, thereby impacting total portfolio outcomes”.

Summary of the Zenith 2016 Property Sector Review

From an initial universe of 84 products:

4 were rated “Highly Recommended”
19 were rated “Recommended”
10 were rated “Approved”
51 were “Not rated”

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Listed Infrastructure still adding value, but requires an active approach going forward, says Zenith

Thu, 23 Jun 2016 21:40:03 +0000

Sophie Gibbons

Outsized returns from a passive Listed Infrastructure approach will be harder to come by in the current markets, according to Zenith Investment Partners latest Listed Infrastructure Sector review.

Sophie Gibbons, Zenith Senior Investment Analyst, said “In the 12 months to 30 April 2016, the Infrastructure sector as measured by the S&P Global Infrastructure Index $A (Hdg), produced a relatively subdued outcome when assessed in a historical context”.

A period of heightened market volatility also contributed to the sector’s increased bifurcation with a 23.8% return differential occurring between the best and worst performing rated funds. Given the macroeconomic headwinds facing the sector, issues with benchmark composition, and the increased sensitivity of mid-stream assets to commodity prices, a blanket approach to the sector could be problematic.

However, the considerable outperformance of some managers indicates there are still ample opportunities for investors to generate favourable outcomes.

In light of the market’s recent turmoil, Zenith’s Listed Infrastructure sector Review has sought to reassess whether the asset class can continue to retain its more defensive characteristics. To aid with this assessment, the research house has established a set of criteria against which the performance of the asset class may be measured and concludes that Listed Infrastructure continues to retain a core set of characteristics; namely lower volatility and correlation to equities, with relatively high levels of liquidity.

Zenith concludes with a discussion on credit analysis. “We argue that infrastructure analysts need to subject corporates to a higher level of debt analysis, given the importance of debt in funding operations. We stipulate that deep dive solvency analysis can aid analysts in gaining a more informed view on a corporate’s financial position, a factor that is of increased relevance amidst times of credit market stress”, said Sophie Gibbons.

Summary of the Zenith 2016 International Shares – Listed Infrastructure Sector Review

From an initial universe of 18 infrastructure funds:

4 were rated “Highly Recommended”
9 were rated “Recommended”
1 was rated “Approved”
4 were “Not Rated”