MLC research warns on unlisted property
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MLC Implemented Consulting’s senior asset consultant, David Klug, said research undertaken by his organisation has revealed that most of the gap between the valuation of listed and unlisted assets was attributable to “valuation lag”.
“The strong conclusion from our research is that valuation lag accounts for most of the current valuation gap, and therefore unlisted property will continue to be revalued downwards over the coming months,” he said.
Klug said this process had commenced with unlisted markets in Australia and the US deteriorating by minus 7.1 per cent and minus 7.4 per cent respectively over the six months to May.
He said these realities needed to be taken on board by superannuation fund trustees, boards and investment committees, which might be seduced into shifting their investments to providers that are temporarily shining in performance surveys due to their higher unlisted property allocations.
“A 15 per cent allocation to Australian direct property last year would have turbocharged reported returns by up to 7.5 per cent,” he said. “Unfortunately, these returns are likely to prove not only as expansive but as ephemeral as the smile on the Cheshire cat, and in effect you would be investing now largely at 2007 prices.”
AUTHOR
Mike Taylor
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