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.
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.