Global listed property funds bested all other fund types with highest May returns
Global listed property funds delivered the highest returns of all types of managed fund in May, adding 3.3% for the month, according to the Morningstar Australian Institutional Sector Survey.
The UBS Global Investors ex Australia index rose by 3.3% over the month to 31 May in Australian dollar terms. The index delivered 11.6% over the 12 months to the end of May and 14.8% over the calendar year to date.
UBS Clarion Global Property Securities fund performed the best over the month, gaining 3.8%.
AMP Capital delivered the highest returns over the 12 months to the end of May and year-to-date, gaining 13.5% and 16.3% respectively.
AMP Capital deputy head of global listed real estate James Maydew said the fund management team looked at individual REITs and aimed to identify the best ones. The fund currently has about 60 stocks in its portfolio.
“We have a quality bias to the portfolio construction. We believe quality will outperform throughout the real estate cycle ... When we say quality, we don’t just mean quality real estate. We also look at quality management, capital management and balance sheet,” Maydew said.
Commercial property in London looked attractive at this point in the property cycle, he said.
“The market there was impacted heavily by the financial crisis. Nothing was developed there for an extended period of time. We are now experiencing economic growth and jobs growth which is translating to falling vacancy rates, occupancy gains and rental tension,” Maydew said.
The manager was also attracted to REITs that had development capabilities. “We want developers because they are the people that can make the margin on real estate in a rising market. Real estate is cyclical and we have to be able to own those managers that can access that cyclical environment.”
Aged care is another theme that AMP Capital’s team has been pursuing. While the market for listed aged care providers in Australia is quite small, it is better established globally, Maydew said.
“Ageing populations are translating to more demand for aged care facilities ... That’s going to hold for a long period of time.”
Research house Morningstar upgraded AMP Capital’s global REIT strategy from bronze to silver during its latest review of funds in the sector, but downgraded it back to bronze following the departure of two London-based team members in April.
Maydew said there were 14 people in the team before the departures, and the aim was to rebuild the team to 15 people, including three people based in Europe.
He said the manager had received a large number of applications for the roles from all over the world and expected to fill the positions within the next couple of months.
It was considering relocating one or two team members from elsewhere in the world and backfilling those positions with new local recruits to ensure the team’s culture was maintained in the London office.