Avoid JBWere's property fund, says Morningstar
In an unusual move, research house Morningstar has moved Goldman Sachs JBWere's (GSJBW) aggressive Australian listed property strategy to ‘avoid’ status, following sweeping changes to its management team and a lacklustre 2008 performance.
Morningstar noted GSJBW’s thinning assets base and the decision at Goldman Sachs Asset Management to wind back its dedicated global REIT business. It further said given the departure of head of real estate Tim Hannon, who the research house called “the backbone of this strategy”, they see “few reasons for investors to stick around”.
Under Hannon’s leadership, the portfolio’s strategy “was more aggressive than most, with smaller-cap exposure and higher turnover”. However, Morningstar said poor performance in 2008 has diminished the strong record under Hannon.
“This strategy had developed a strong track record up until the end of 2007, but the carnage in the listed property sector in 2008 combined with this aggressive positioning delivered a terrible outcome for the year,” Morningstar reported. “The resulting collapse in the assets base led to a reassessment of the business and Hannon’s departure.”
Morningstar noted particularly that the portfolio’s “smaller-cap tilt” driven by Hannon “proved painful in 2008”.
GSJBW’s chief investment officer Andrew Cooke is now charged with the management of the portfolio, but Morningstar questioned the firm’s capability in the sector given structural changes in the sector and concerns that Cooke is “not devoted full-time to the ongoing management of this strategy”.
Morningstar praised Cooke’s concentration of the portfolio in larger stocks, but said “for investors looking for dedicated AREIT exposure, we can’t see any argument for investing here”.
“For existing investors, given the massive declines of 2008 and likely lack of capital gains tax issues, we see little reason to stay,” the report said.
Hannon was asked to leave GSJBW in February, a few months after his second-in-command Andrew Smith left the firm.
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