New Standard & Poor’s (S&P) research has revealed the Australian listed property sector is highly concentrated and reliant on volatile revenue streams and exposure to offshore property to drive performance.
S&P analyst Peter Ward said these factors led to increased risk in the sector, which investors needed to be aware of when striving for higher returns.
“The median rated property securities fund manager has not been able to outperform the benchmark, reflecting the challenges associated with investing in this sector,” Ward said.
“Most of the funds have long track records, but there has been significant change among the investment teams managing these funds, with teams and individual analysts moving from one organisation to another, internal restructuring and new analysts joining the teams.”
However, he added: “The sector still provides stable income streams, diversification at property level, high liquidity and a combination of income and growth returns with low correlation with other asset classes.
“It is also a cost-efficient way to achieve liquid investment-grade property exposure.”
S&P assigned star ratings to 24 products classified as Australian property securities funds as part of the review.
Eight funds received four-star ratings, 11 funds received three-star ratings and four funds received two-star ratings.
The complete list of ratings can be found in the sector report.
