Turbulence for LPTs

Significant volatility characterised the LPT sector in 2006-07, despite trusts returning an average of 25.9 per cent, according to specialist property fund manager APN Funds Management.

Director of retail funds Michael Doble said the range of individual returns within the LPT sector last year “offered a dramatic reminder of the need for investors to diversify”.

“One stock lost as much as 73.8 per cent last year, while another, the Trinity Property Group, returned a stellar 140.5 per cent”.

Doble said that some investors could have “suffered” last year as a result of the sector volatility, having got “caught up in a rising market”.

“Some investors think investing in any LPT will serve as a reasonable proxy for the returns from the sector generally.”

He said the message has “yet to get through to some investors that diversification with LPT investments is essential risk management”.

“Sure, the sector produces consistent income, but the investor still needs to manage risk.”

Outperformance of the office market, which returned an average 31.6 per cent last year, also characterised the LPT sector during the year, he said.

“This outperformance is consistent with our view that the office sub-sector was undervalued, and we have invested overweight in it.”

He said performance of the Perth and Brisbane office markets, where vacancies had fallen to 0.9 per cent and 1.7 per cent respectively, was particularly strong.