There are signs that domestic listed property may have turned the corner, with at least one JANA client following advice to get back into the asset class following a two-year absence.
The $2.5 billion TWU Super used to split its allocation to listed property 50:50 between Australian and overseas securities, but terminated the domestic component two years ago on the advice of its asset consultant, JANA Investment Advisors, according to chief investment officer Andrew Killen.
However the fund has just appointed Melbourne-based boutique SG Hiscock to a “benchmark unaware” Australian property securities mandate, returning the listed property portfolio to a 50:50 domestic:overseas split.
The head of investment outcomes at JANA, Ken Marshman, confirmed the consultancy had long been bearish on all listed property, because of the sector’s high levels of leverage, and “excessive” prices in comparison to underlying net tangible asset values.
However more recently, prices in the sector had declined to the point where LPTs were now “line ball” with direct property, Marshman said, and worthy of some exposure for clients with a relatively greater need for liquidity.
“We’re not saying ‘rush into LPTs’, and we’re allocating to unlisted property as well, but it’s true that listed property has become marginally more attractive,” Marshman said.
Reflecting this caution, Killen said the LPT mandate with SG Hiscock was far from a beta play on the sector.
“If Westfields goes on a run, we will underperform,” he said of the mandate, which hopes to capitalise on a swing back to equilibrium following a period where offshore REITs have outperformed their Australian counterparts by nearly 40 per cent.
In the process of appointing SG Hiscock, TWU Super terminated its mandate with Perennial’s Global Property Securities Trust, but has retained its allocation to Russell Investments’ multimanager global REIT vehicle.
Meanwhile, the fund also increased its exposure to emerging markets from 15 to 20 per cent of its overseas equities portfolio, equal to about 1 per cent of TWU Super’s overall portfolio, or $25 million. The beneficiary is Russell Investments’ emerging markets multimanager trust.