When asked what had driven the Retail Property Fund’s success in recent years, Australian Unity Wealth fund manager, Nikki Panagopoulos, pointed to both diversification and improving assets.
Although retail property seems too narrow to offer much diversification, Panagopoulos said there’s actually many sub-sectors within it, making it one of the most complicated asset classes.
The fund is invested in both neighbourhoods and service stations, amongst other sub-sectors, for example, with the latter in particular really shining in the last year. Having bought into service stations a while ago, Panagopoulos said the fund was now seeing the benefits of the multiple income streams they offered, such as profit from the consumer goods stores located within them.
While the asset class is expensive to invest in currently, Panagopoulos sees opportunity in developing and improving assets.
“It’s tough, and you have to be ahead of the game,” she says, but with a skilled team and strong research you can be. The Australian Unity funds that are finalists, for example, have lots of asset managers, many of whom are senior, and an analyst with a strong economic background behind them.
Panagopoulos points to one residential area the Australian Unity Retail Property Fund invested in that had been unpopular and a bit forgotten as an area to live in. By improving the area – she cites opening a major supermarket as an example – the appeal of the area to tenants and owners grew.
In this, Panagopoulos says that investing in real property also allows Australian Unity to help local communities. The very nature of the assets its funds invest in are utilised by community members, enabling the fund manager to give back.
In contrast, the third finalist in the category, the Charter Hall Direct Office Fund, kept its investors happy with a much narrower asset allocation of institutional grade office assets. The fund acquires property with long average lease terms, very high occupancy rates, strong tenant covenants, and appeal to tenants regardless of the investment cycle.
According to head of direct property at Charter Hall, Steven Bennett, sticking to assets that met this strict investment criteria drove the fund’s strong performance in the last year as well as de-risking the fund’s cashflow and providing greater income certainty to investors.
