New research from Melbourne-basedProperty Investment Researchhas shown a sustained structural shift towards unlisted property fund managers, which will lead to a further flight to boutique property fund managers as interest rates increase, according to SAITeysMcMahon executive director Judy MacMahon.
The Australian Property Funds Industry Survey 2003 revealed that direct securitised syndicate and unlisted trust investments grew by 620 per cent in the last five year, from $1.6 billion at 31 December 1998 to $10.5 billion at 31 October 2003.
The survey also showed that between 31 December 2000 to 31 October 2003, unlisted trusts and funds offered by boutique fund managers attracted a significantly increased proportion of the funds committed to retail unlisted commercial property, up from 2.9 per cent to 16.6 per cent.
According to McMahon, financial advisers need to have access to the best of breed defensive assets and listed property trusts are no longer regarded as defensive due to increasing levels of volatility in that sector.
“Fund managers have exposure to listed property and have been using that as a proxy for defensive assets but this has been offset by the weight of money flowing into the sector upsetting the balance,” McMahon says.
“Bigger funds management groups with exposure to large properties will use them as a growth play but they are restricted in much the same way that large scale equity managers find their weight of funds under management moves the market.”
McMahon says the boutique property sector is at the same stage equities were in the early 1990s and is moving from being regarded as a series of individual plays to working within a fund structure, which has been driven by the rise of listed property trusts.
“However the same skills are being used on the unlisted side of the market to bring performance year on year and that is where some of the value lies in this market,” McMahon says.
