BUY & SELL
AGF team gets real about retail property.
Manager Stephen Way, AGF Investments Fund AGF Global Real Estate Equity Class (Fund) Description Concentrated portfolio of global real estate equities Global equity mandates $1.6-billion Performance 1-year: -1.15%; 3-year: 18.9%; 5-year: -7.9% (as of Feb. 29, 2012) Management fee 3.29%
The AGF Global Real Estate Equity Class fund has a long-standing overweight in the retail property sector, primarily because this part of the market tends to be less cyclical, rents are less volatile and it’s easier for companies to differentiate themselves through the brands in their malls.
“There are a multitude of tenants in all retail shopping centres, probably more so than office buildings, so there is more opportunity for management to add value by moving tenants around and doing brownfield development,” portfolio manager Stephen Way said.
AGF’S portfolio focuses on companies with solid cash flows, good management teams, quality assets and reliable performance. About 60% of the fund is in real estate investment trusts, which pay out a lot of their cash flow in the form of dividends. However, this makes them more dependent on the market if they want to expand or raise capital.
“Well-managed companies with strong balance sheets will have access to the market more than others may, even in tough times,” global equity analyst Thiery Jannini said, highlighting the importance of bottom-up analysis. “For example, even if things aren’t perfect in Europe, we still think there are opportunities to be had there.”
Mr. Jannini points out that onerous zoning and planning restrictions in Europe mean well-located malls often face little competition.
Similarly in the U.S., Way said consumers may be overstretched, but a company such as Simon Property Group Inc. (SPG/NYSE) continues to attract top tenants and customers because it has high-quality shopping centres in the best locations.