AREITs looking up: S&P

The legacy of the global financial crisis (GFC) may still be apparent in the long-term returns of Australian property securities funds, but Standard & Poor’s (S&P) believes the sector is now on the road to recovery.

In its Fund Services’ Australian Property – Listed Sector report, S&P found that after the GFC there had been high-level fund manager changes in AREIT property securities funds teams.

S&P Fund Services analyst Peter Ward said that while some funds were worse off from these manager changes, others benefited immensely.

“During 2010, we particularly noted the disappointing dissolution of Challenger’s and Credit Suisse’s well-regarded property securities teams. However, SG Hiscock & Co. has been the beneficiary of change as the new manager of their funds,” he said.

S&P was also able to resolve four ‘on hold’ ratings that had been applied in 2010 due to manager changes.

The research house now believes the AREIT sector has moved on to a more conservative footing and is well-positioned to take advantage of the recovery.

“Stronger balance sheets, less dependence on equity-like cash flow sources, and a greater reliance on rental cash flows” are three of the reasons Ward sees AREITS as being an attractive investment.

The sector report covered 17 fund managers and 21 Australian listed property strategies, representing over 70 funds.