A-REITs rally may have run their course
Australian real estate investment trusts (A-REITs) have delivered solid results over the past two years - but investors shouldn't expect the same level of returns going forward.
Australian Unity Investments head of portfolio management Edward Smith said that while the middle of 2011 saw deep discounts in the pricing of the net tangible assets (NTA) of A-REITs, the market has since recognised the refinancing and managerial restructuring that has taken place across the sector.
"I think some of the bullishness has been knocked out of the market and that's actually good for investors," he said.
"We've seen them draw back from all of the international investments and we've seen much lower debt levels across the sector, all of which means that going forward it should be less volatile than it was in that critical period during the global financial crisis, and will sit up well for the future."
According to Smith, the sector is now trading close or in some cases well over NTA.
"My pick would be that I don't think we're going to see anything like the returns we've seen in the last couple of years from A-REITs - that run has now happened," he said.
"We don't expect it to be a disaster, but when we look at the pricing in that sector relative to the other opportunities that are there, we think the opportunities are probably now moving to other parts of the market."
Recommended for you
Outflows have doubled in the property and infrastructure space to $1.3 billion with advisers instead favouring private markets as Morningstar data finds active property funds are struggling to outperform.
Fund manager HMC Capital is seeking to expand fundraising for its private equity vehicle into wholesale platforms now that it has achieved a three-year track record, while scrapping plans for a second fund.
Former Platinum co-founder James Simpson will take up a non-executive role at Income Asset Management as two directors retire.
Bell Financial Group has announced a 44 per cent decline in half-year net profit after tax but record funds under advice as it transitions into a diverse wealth management business.
