Listed prop­erty fund im­presses

The fund aims to pro­vide in­vestors with in­come and growth over the medium to longer term at medium to high risk, pre­dom­i­nantly ob­tained in the South African listed prop­erty mar­ket.

Finweek English Edition - - MARKET PLACE - Ed­i­to­rial@fin­week.co.za

Fund manager in­sights:

The Absa Prop­erty Eq­uity Fund is suit­able for in­vestors who seek ex­po­sure to the JSE-listed prop­erty sec­tor and pro­vides di­ver­si­fi­ca­tion from gen­eral eq­uity shares.

South African listed prop­erty de­liv­ered a to­tal re­turn of 1.37% in the first quar­ter of the year, un­der­per­form­ing both eq­ui­ties (3.78%) and bonds (2.46%).

How­ever, over the longer term, listed prop­erty has proven to be one of the best as­set classes, re­turn­ing 14.24% per an­num over the last 10 years, beat­ing the re­turns on eq­ui­ties (9.82%), bonds (8.06%) and cash (7.29%).

The Absa Prop­erty Eq­uity Fund de­liv­ered a to­tal re­turn of 3.06% for the first quar­ter of 2017, out­per­form­ing the me­dian manager by 1.71% and the listed prop­erty sec­tor by 1.69%, says Fayyaz Mot­tiar, fund manager.

The fund has an ex­cel­lent track record of out­per­for­mance and Mot­tiar says the key dif­fer­en­ti­at­ing fac­tor is that the in­dex is never the start­ing point for stock se­lec­tion.

Ac­cord­ing to Mot­tiar, he uses a bot­tom-up ap­proach and looks at each com­pany fun­da­men­tally.

He says the fund owns companies that are of high qual­ity, with un­der­ly­ing as­sets of qual­ity and good man­age­ment.

The companies must have sus­tain­able cash flow, be able to grow its cash flow and have a healthy bal­ance sheet.

The fund fo­cuses on to­tal re­turns and tar­gets a bal­ance be­tween the com­bi­na­tion of in­come and cap­i­tal growth.

As at the end of the first quar­ter of 2017, the listed prop­erty sec­tor traded on a his­tor­i­cal yield of 6.3% and a for­ward yield of 7.3%.

Ac­cord­ing to Mot­tiar, the sec­tor is ex­pected to de­liver be­tween 8% and 9% dis­tri­bu­tion growth over the next year.

“This growth out­look against a sub­dued eco­nomic back­drop, po­lit­i­cal in­sta­bil­ity and mar­ket uncer­tainty re­sults in the South African listed prop­erty sec­tor re­main­ing an at­trac­tive in­vest­ment choice,” he ex­plains.

Why fin­week would con­sider adding it:

The fund has con­sis­tently out­per­formed its bench­mark and sec­tor aver­age since in­cep­tion and over one-, three-, five- and 10-year pe­ri­ods. It was also ranked first amongst its peers over the three-, five- and 10-year pe­ri­ods.

At this year’s Rag­ing Bull Awards, the fund was awarded cer­tifi­cates in two cat­e­gories: Straight Per­for­mance – Best South African Real Es­tate Fund; and Top Risk-Ad­justed Per­form­ers – Best South African Real Es­tate Fund on a Risk-Ad­justed Ba­sis. This is the third con­sec­u­tive year that the fund has been recog­nised for its per­for­mance.

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