Strong focus on the multi-family apartments sector in the US coupled with the fund’s ‘buy, fix and sell strategy’ has helped Spire Capital’s USA ROC II fund top the list for the best performing global property funds.
The fund’s annualised returns for its three-year performance were 17.54 per cent, as at the end of May, 2017 – much higher than the average for the global property sector which returned 8.5 per cent, according to Money Management’s analysis based on FE Analytics’ data.
However, at the same time all five funds topping the sector recorded three-year annualised volatility much higher than the sector average (9.8).
Capital Spire’s director, Matthew Cook explained that the volatility, which in the case of its USA ROC II fund was 15.10, consisted of a few components.
“All of the investments are in the US and for US-dollar denominated investments and we don’t hedge for currency,” he said.
“The other point of difference is it’s not volatility per se but it’s the effect that we are actually buying assets and adding significant value to.”
According to Cook, the fund applied a strategy different to the majority of funds which focused on stabilised properties and were acquiring commercial properties with the intention to specifically provide a current paid yield to investors.
Spire Capital’s USA ROC II fund, which had the largest chunk of its portfolio (30 per cent) invested in the multi-family sector in Georgia, US, said it was focusing on the suburban markets in second-tier cities like Dallas, Denver or San Antonio rather than the key getaway cities and coastal markets which had very low yields.
According to Cook, having invested in the multi-family apartments sector in the US, the fund also offered Australian investors an exposure to the asset class that most funds did not.
“We don’t have that asset class here in Australia and that’s an issue that the Australian government is actually looking to try to address and a lot would need to change around permitting tax unit costs to create that asset class in Australia” he said.
“Most advisers would typically invest in A-REITs [Australian real estate investments trusts] and G-REITs [global real estate investment trusts] in the listed market and typically buying stabilisation assets and looking to get an income from that strategy.”
“[While] we are buying in the market where there is a little bit [of] challenge around the assets and then we fix them, our job is to fix them and sell,” Cook said.
The other top funds that invested the majority of their assets into the global property sector were: ClearView CFML Listed Property fund which returned 14.96 per cent over a three year period, Premium Asia Property (14.47 per cent), Resolution Capita Global Property Securities Unhedged (13.90 per cent) and Dimensional Global Real Estate Trust (13.65 per cent).
