Principal Global Investors has increased its allocation to the beleaguered Centro listed property vehicles, believing the group is capable of surviving its liquidity shortfall.
Previously underweight the Centro listed property funds, Principal viewed last month’s downgraded Centro profit forecasts as an opportunity to buy into the vehicles and now holds overweight allocations to both the Centro Retail Trust (ASX: CER) and Centro Properties Group (ASX: CNP), Chris Lepherd, Principal director of portfolio management, said. “Between the holdings, they have been attributors rather than detractors [since the overweighting],” Lepherd said. Principal’s products include Australian and global listed property securities funds. The high-yield strategies run by listed Australian property securities and equities boutique SG Hiscock & Company have overweight allocations to CER, Stephen Hiscock, SG Hiscock managing director, said. “We don’t think CER is permanently impaired,” Hiscock said, taking the view that the vehicle is a good portfolio of property securities with the potential for long-term performance. Meanwhile, Members Equity Investment Funds (MEIF) announced that its exposure to Centro funds was less than 2 per cent of total property assets in its property portfolio, and would exert a “minimal” impact on overall performance, Anna Parente, MEIF manager of retail products, said. In December 2007 Centro cut its operating distributable profit per stapled security to 40.6 cents, from 47 cents, for fiscal 2008, citing high funding costs as the primary cause. Principal’s Lepherd said the Centro products were undervalued since the market was trading the securities with an expectation that the properties group would not survive. “Centro is being traded on wind-up value,” he said. Yet Hiscock said that reaching a conclusive view for the future of the Centro funds was difficult, given that third parties, such as the banks who supplied Centro with debt and investors, would play a strong hand in the fate of the company. “Even now it’s hard to tell what the correct strategy is.” However Lepherd said assumptions that the banks in business with Centro would leave the company gutted were incorrect. “Most of the banks would have had a long-term relationship with Centro,” he said.
Future Fund chief investment officer Ben Samild said that FY24 has been a great year for alpha creation, thanks to strong returns in equities and, unusually, across multiple hedge fund strategies all at the same time. He reflected the past few years have been “a difficult time to be an asset owner and to generate positive returns for risk assets” but the Future Fund is tracking well of its long-term mandate.
Simon Hoyle and Darcy SongSeptember 4, 2024
