St George-owned manager of managers Advance Asset Management has made a major shift to global listed property, allocating half its listed property fund to two global mandates in a move to diversify away from the increasingly concentrated Australian LPT universe.
The multi-blend Advance Property Securities Fund – previously 100 per cent invested in domestic listed property trusts – has terminated one manager and appointed two others to tap into “some of the better investment opportunities” outside Australia, according to Advance head of investment solutions Patrick Farrell. Credit Suisse Asset Management lost its mandate worth half of the $360.5 million fund. The released funds were split 60:40 between international real estate investment group CB Richard Ellis and United States-based property manager European Investors Incorporated respectively. IOOF-owned Perennial Investment Partners has retained its mandate for the other 50 per cent, and is now the only domestic LPT manager for the fund. Farrell’s reasons for continuing with Perennial include the “good track record” of the Perennial Real Estate team. He said that team, headed by Stephen Hayes, has continued the strong performance it established at Colonial First State prior to the entire team moving to Perennial in January last year. Farrell also said Perennial already has good global exposure, so if Advance ever wanted to expand its global portfolio there is the potential to do so through the Perennial mandate. According to Mercer and Advance figures, the domestic LPT market has provided marginally better returns than the global LPT market on a 10 year average. However, further retrospective research showed that between 31 October 2002 and 31 July 2007, any allocation under 70 per cent of a portfolio to global LPT’s would have resulted in an increase in returns and a reduction of risk. Farrell said the domestic LPT market had become less attractive mainly because of its concentrated nature. The domestic market has only 30-odd stocks to choose from – with the five largest trusts comprising 70 per cent of the index – whereas the international real estate investment trust index EPRA NAREIT has 380 stocks to choose from.
Since taking over the top job at the $44 billion Funds SA more than a year ago, chief executive John Piteo has ushered in an investment function overhaul and wrapped up an important stage of the fund’s five-year data transformation program. It pledges to recentre around investment performance and more efficient processes, as the “missing piece” has been found in incoming CIO Con Michalakis.
Darcy SongJanuary 10, 2025
