The listed property trust asset class will finish the financial year with at least its second strongest performance ever, having already achieved an index return of just under 15 per cent in the 11 months to the end of May.
The strong showing for the asset class will position it as one of the best performing asset classes for the second year running according toAusbil Dexiadeputy chief investment officer Winston Sammut, as investors continue to dive for cover with defensive investments amidst market uncertainty and volatility experienced in world sharemarkets.
In the 2000 and 2001 financial years, the LPT index has returned 16.6 per cent and 13.9 per cent respectively, and the current financial year is poised to be the best year ever.
In the month of May, the sector returned three per cent, far outpacing the S&P/ASX 200 Accumulation Index of 0.85 per cent. The comparison between the two sectors for the 11 month period to the end of May is an even sorrier one: LPTs tower above the S&P/ASX 200 by more than 15 per cent, the latter index failing to post an overall return in the black for this period.
Star performers in May wereMacquarieLeisure Trust with a hefty 7.6 per cent, Gandel Retail Trust with 4.8 per cent, and Centro Poperties Group which returned 2.9 per cent, according to Ausbil Dexia.
However, there were funds which didn’t scrape above break-even, with MTM Entertainment Trust falling 15 per cent, Prime Retail Group and Macquarie Goodman both losing 3 per cent.
Examined at the sub-sector level, diversified trusts and commercial LPTs achieved returns of more than 3 per cent, while retail and industrial achieved around the mid-2 per cent mark.
“Looking ahead, the retail sub-sector is likely to remain strong on the back of continued positive growth by the Australian economy,” Sammut says.
Sammut says the performance of LPTs does not appear to be hampered by the rising interest rate climate.
“Even though interest rates are rising, many trust managers have hedged their debt so that any increased borrowing costs should not impact significantly on earnings distributions,” he says.
“How long the money stays in the sector, however, depends on the pace of the US recovery and the speed of interest rate rises domestically.”
