Implemented consultants which have benefited from an unlisted property exposure are beginning to unwind that position, Deloitte has found in a survey which confirmed that returns have been heavily dependent on consultants’ mix of property exposures.

The survey looked at the property holdings in the ‘balanced’ implemented products offered by consultants, the average of which returned -9.7 per cent for the year ending June 30, 2008. “The two common themes were an overweight position in Australian listed property and an underweight stance on alternative assets,” Wayne Walker, superannuation partner at Deloitte, said.

Michael Gomersall, director at Deloitte, said it was expected that consultants with a higher exposure to unlisted property would outperform their peers. But he added that with unlisted property outperforming the listed index by over 50 per cent last year, some consultants thought there might be a lag effect, and were tipping unlisted property to decline in value, although the timing and magnitude of the lag were both difficult to predict.

“We see no evidence of asset consultants rushing to buy more unlisted property at current valuations,” he said. “In fact, we see evidence that owners of units in quality unlisted assets have started to offload their holdings at discounts of up to 8 per cent in some instances. These are the same assets that consultants had to stand in line for only months ago.”

But Martin Hession, head of property at Australian Unity Investments said it was a common misconception that listed property acted as a surrogate for unlisted. “Listed property may be down 40 per cent, but that doesn’t mean the underlying assets have lost value,” he said. “Listed property managers got involved in all sorts of things like short-term debt and overseas currency exposure.

They became companies rather than third-party trusts. The market is beating up LPT managers just like it is any other equity.” Hession said the credit crunch may even have helped the direct property market in this cycle. “There have been fewer developments due to the credit squeeze, so there has not been the oversupply of property that you would typically see.”