a lot of market volatility ahead. Rising interest rates, for example, will hurt listed property “initially, but my view is that listed property will also be the fastest to recover”.
Listed property can be described as a hybrid between equity and bonds, and traditionally its performance is very closely correlated to the bond market. Investors get a steady income flow that is paid out from the rental income earned, while it also offers capital growth.
In South Africa, where this fund has most of its exposure, the market is characterised by escalating rental payments. In developed markets, this is not always the case, and there can be no increase in rental income over extended periods of time. Mottiar likes offshore exposure with similar characteristics as the South African market, such as provided through its holding in New Europe Property Investments (Nepi) that operates in Eastern Europe. The fund offers about 20% offshore exposure.
Another characteristic of the Absa Property Equity Fund is that it is actively managed, and they prefer to take big positions in a smaller number of stocks where they have conviction in the prospects of the company, says Mottiar.