A predicted slump in the property market will transform the behaviour of fund managers in the sector, delegates at the seventh annual the Australian Direct Property Industry Association (ADPIA) were told yesterday.

Anton Lawrence, director of property researchers Managed Investments Assessments (MIA), told the ADPIA conference the industry has some significant challenges ahead. “There will be a significant down turn in property and when it will occur, I suspect the whole industry will need to reinvent itself. In about ten years, property industry will change and managers will have to rethink their upfront fees,” Lawrence said. “And fund managers will need to adopt defensive mechanism for currency and interest rates.” He was speaking on a panel of property experts that also included Ken Atchison (Atchison Consulting), Kevin Prosser (Lonsec), John Welch (PIR) and Dinesh Pillutla (AEGIS Equity Research). Lonsec’s Prosser also said the direct property investment industry must adapt to competitive pressures, particularly with increasing demand for open-ended investment structures. “Investors today are looking for diversification and liquidity in their portfolios. Traditional unit trust styled products add complexity and increase volatility,” Prosser told the delegates. “The direct property sector must realise that it now competing with other asset classes like infrastructure and hybrids. It must focus not only income but also provide constant returns by standing out from the crowd.” The three key trends facing the direct property investment industry were fees, diversification and need for liquidity, the researchers concluded.