The 2.7 per cent outperformance of industry super funds over retail master trusts in the year to April has been attributed to a huge difference in how the two sectors invest in property, according to super research and ratings house Chant West.
Chant West principal Warren Chant said industry funds had benefited from substantially larger allocations to unlisted property than their retail peers. The Australian unlisted property index, which is largely based on the appraisals of professional valuers, rose 19 per cent in the year to April, compared to a 24 per cent fall in the listed market (or a 19 per cent fall globally).
On average, industry funds had allocated 87 per cent of their property portfolio to unlisted property, while retail funds only held 11 per cent of their property directly – and 53 per cent in domestic LPTs. “Industry funds will be looking closely at their property assets in the lead up to the reporting season. When you consider the credit crunch and the savage re-pricing of risk that we’ve seen in other markets, it raises the question of how realistic are current appraised property values,” Chant said.
“We’ll only know that when we have a chance to compare book values with actual sale prices when properties change hands, hopefully in a ‘willing buyer, willing seller’ market.”
The $28 billion AustralianSuper has none of its 13.5 per cent property exposure in LPTs as the sector has been too expensive, Mark Delaney, the chief investment officer, told a PIMCO conference last month.
He said his fund had not invested in LPTs for almost three years, although the listed sector was growing more attractive at its current prices. The balanced options of industry funds returned -2.6 per cent net for the year to April, while master trusts netted an average -5.3 per cent, according to Chant West.