When asked what drove the fund’s performance in the past 12 months, Pendal’s head of listed property, Pete Davidson, said: “Our focus on having a valuation toolkit, [and] using a variety of valuation measures meant we could identify value in stocks that had strong equity-style valuation”.
Within this, Davidson noted that in the last year traditional NTA-based stock valuation had lagged, with many NTA-supported stocks becoming value traps rather than traditional value.
Drilling down into where value could be found, the Pendal Property Securities Fund’s strong performance in the last year was supported by overweight allocations in funds managers, industrial and logistics stocks, with falling bond rates supporting the fund managers.
Davidson said that underweights to traditional mall retail assisted the fund’s performance, as these stocks were impacted by Australia’s weakening macroeconomic environment. He believed that this under-allocation would continue to support the fund going forward, suggesting that asset value in the sector would decline in the coming year.
Interestingly, a finalist in the category, the Charter Hall Maxim Property Securities Fund, was also underweight to retail, which Charter Hall head of listed securities, Winston Sammut, also found key to the fund’s success.
“From a top down perspective, we took the view early on that the retail environment was going to be difficult, particularly in the discretionary retail sub-sector, coupled with concerns relating to the residential market,” Sammut said, with the fund weighting its portfolio accordingly.
The Legg Mason Martin Currie Real Income Fund’s, portfolio manager, Ashton Reid, was optimistic about the strength of the Australian property securities sector in general going forward.
“The underlying growth in income of the Real Income Fund holdings remains population growth,” he said.
“Australia has very strong population growth in a global context, and the leverage that real assets have to this strong population growth provides a long-term sustainable income growth opportunity that few other asset classes can match.”
