Property funds feel Resilient heat

FOR THOSE EXPOSED

placed them among the top 15 funds across all categories for the year to end December. In just under nine weeks, they’ve both more than given up all of those gains.

This boom and bust have the same cause: they were highly exposed to the Resilient group of REITs. Last year, this was great for investors as Resilient was up around 35%, Greenbay 60%, and Fortress over 30%.

So far in 2018, the opposite has been true.

Not all property funds have however been in this boat. As Table 2 shows, the top-performing real estate unit trusts so far this year have managed to deliver positive returns. The Marriott and Nedgroup funds were among the three worst-performing funds in this category in 2017, as they both carried zero exposure to any of the Resilient group REITs.

The longer-term impact of Resilient’s difficulties is that the performance of property funds over the past three years now looks decidedly mediocre. Table 3 shows the top performers.

Over the same time frame the top-performing SA general equity fund has delivered an annualised return of over 10%. Even the leading bond funds have returned over 9% per year.

This period of weakness has therefore taken some shine off the listed property sector. Managers will have some work to do to recover these losses, starting with ensuring better portfolio diversification.