All three real assets, including Australian listed property, global listed property and global listed infrastructure, have experienced strong performance and flows over the past few years, according to Morningstar’s Listed Real Assets Sector Wrap-Up.
Although Australian listed property remained the largest of the three real asset fund categories, the sector gave up much of its lead since the Global Financial Crisis (GFC) as Australian investors shifted to global listed infrastructure funds.
Following this, global infrastructure overtook global property as the second-largest category of the three.
The study also found that infrastructure could become the largest real asset fund category, through for that to happen the universe of underlying infrastructure stocks should grow.
According to Morningstar, the landscape of listed real asset funds was ready for change over the next few years, with new funds launching, and investment strategies evolving.
“We explored a perverse irony in global property and global infrastructure funds. A key attraction is the income stream, and thus most global infrastructure and property funds are currency-hedged. The rationale is that income-seeking investors don’t want currency risk,” the report said.
“But the irony is that currency hedging can undermine a fund’s income, potentially negating the reason for investing in the first place.”
Five Morningstar’s medallists achieved the highest possible rating of Gold, which included BlackRock Indexed Australian Listed Property, Vanguard Australian Property Securities ETF, Vanguard Australian Property Securities Index Fund, Zurich Investments Australian Property Securities and Resolution Capital Global Property Securities.
At the same time, three strategies were downgraded: Antares Professional Listed Property was cut from Bronze to Neutral; Pendal Wholesale Property Investment was lowered from Gold to Silver; and UBS Clarion Global Property Securities was reduced from Silver to Bronze.
Morningstar also initiated coverage of two strategies, both of which were neutral – Legg Mason Martin Currie Real Income and Pendal Wholesale Global Property Securities – while coverage of one strategy, AMP Capital Global Infrastructure Securities, was dropped.
