Global real estate should not be overlooked in terms of ongoing asset allocation, according to Quay Global Investors principal and portfolio manager, Chris Bedingfield.
Addressing last week’s Bennelong Funds Management Investment Forum, Bedingfield said of nine major asset classes, global real estate had ranked in the top five asset classes for 13 of the past 17 years.
He said that, on this basis, it should play a larger role in Australian investors’ portfolios.
“Unhedged global real estate has been one of the best performing asset classes since the turn of the century, delivering around eight per cent compound total returns,” Bedingfield said. “Over that same period, we have seen two US recessions, a European debt crisis and a 10 per cent appreciation in the Australian dollar relative to the US dollar, detracting from these returns – and yet it has still put in top returns.”
He said that while Australians hade a well-documented love affair with local residential property, they could be achieving better, sustainable, long-term returns by looking globally.
While acknowledging that a consensus existed that interest rates were set to move into a tightening cycle, Bedingfield claimed global property is not as sensitive to interest rate moves as many people believe.
“While interest rates do affect the performance of global REITS over the short-term, over the longer term the impact is negligible,” he said. “During the last interest rate tightening cycles in the US and in Australia, global real estate did not underperform; in fact during this period global REITs were a particularly strong performer, in part thanks to a strong performance from the US.”
