Real assets to reward patient investors

23 June 2020

A diversified portfolio of Australian real estate investment trusts (AREITs) and listed infrastructure may pay off patient investors by providing them with an exposure to the country’s growth and urbanisation, according to Resolution Capital. 

The firm’s portfolio manager, Jan deVos, said the shift to digital, accelerated by COVID-19,  benefited some real asset companies, while adversely affecting others.  

DeVos noted that in the REIT space globally, investors could find extraordinary opportunities in property sectors such as life sciences spaces, residential for rent, data communication towers and healthcare. But unfortunately, when it came to A-REITs there was limited exposure to these alternative property sectors. 

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“This is why investors must look to a combined portfolio of carefully selected A-REITs and Australian listed infrastructure to gain exposure to the undeniable growth and urbanisation trend,” he said. 

As far as attractive subsectors in the AREIT space were concerned, deVos pointed to logistics, childcare and hotels as those with a strong outlook. In the Australian listed infrastructure space, utilities and pipelines still offered predictable earnings outlook, he stressed. 

“When it comes to airports and toll roads, we expect the recovery to be quicker for toll road companies such as Atlas Arteria. Resolution Capital took advantage of recent weakness in the Atlas Arteria Group share price to increase its holdings.  

“Meanwhile, Transurban’s ability to increase tolls at above inflation levels is attractive for investors.” 

According to deVos, it would take until at least 2023 until international passenger numbers returned to 2019 levels for ASX-listed airports but airport operators with superior balance sheets, such as Auckland International Airport, would recover in greater shape. 

“Predictable cashflows, strong capital structures and experienced management teams should be key for investors when selecting listed Real Asset investments,” he said. 

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