APN and Pengana get top property ratings
InvestorWebhas granted two funds — APN and Pengana Capital — its six star (‘exceptional buy’) rating in the 2003 review of the Australian listed property sector with a further four funds —Credit Suisse,HSBC,Merrill LynchandUBS— being rated ‘strong buy’.
However only one manager in the field of 20 individual funds received less than a ‘buy’ rating, withBTrated Investment Grade. InvestorWeb says this indicates “the sector is characterised by a high degree of homogeneity, without a large divergence of investment styles or approaches”.
Included on InvestorWeb’s recommended list were APN, HSBC, Credit Suisse and UBS, as well as HSBC Combined for combined listed and direct property.
ING and Merrill Lynch were removed from the recommended list, although InvestorWeb still assigned a positive rating for both managers.
The report also examined the success of active management in the sector. While it provided a relatively poor return over the last year, with the median manager only matching the performance of the benchmark at 8.8 per cent, InvestorWeb is confident going forward active management will add value.
This view is supported by the diversification of listed properties away from pure rental income, creating growth and mis-pricing opportunities; trusts increasing their overseas exposure diluting informational efficiency and offering the chance for managers to generate alpha; and LPT managers becoming more willing to diversify into non-index securities that derive their income from property assets.
On the outlook for the sector, InvestorWeb senior investment analyst Rodney Sebire says, “the LPT sector appears to be suffering from a high degree of informational efficiency, but we expect this to change in the medium term. As LPT’s continue to increase their exposure to overseas property assets and non-rental income streams, we expect the opportunity set to identify mis-pricing will increase and exploitable opportunities for appropriately skilled managers.”
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