Summer Listed Property

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Summer Listed Property fund performance summary as at 31 March 2018. 

Fund at a glance

Unit price (as at 31 March 2018): $1.0186

Date the fund started: 19 September 2016

For information on fees, see our Fees page.

Further information can be found in the product disclosure statement

Fund objective and strategy

See the Listed Property page for the Summary of investment objective and strategy.

Fund returns

 Annualised total since inception1 Month3 Months1 Year
Fund 1.31% 0.71% -4.11% 5.04%

Fund returns are calculated net of fund charges, trading expenses and accrued tax for a New Zealand resident individual paying tax at the highest Prescribed Investor Rate (28%). 

Top 10 investments

Asset name % of fund net assets
Precinct Properties New Zealand Limited 17.17%
Kiwi Property Group Limited 15.46%
Goodman Property Trust 15.29%
Property For Industry Limited 8.54%
Stride Property Group  8.30%
Vital Healthcare Property Trust 7.38%
Investore Property Limited 5.99%
ANZ Cash Deposit 5.45%
Lendlease Group  2.97%
Metlifecare Limited 2.93%

The top 10 investments make up 89.48% of the fund.

Manager's comments

Fund Performance

Summer Listed Property delivered a return of 0.71% for the month, a loss of 4.11% for the three months to March, and a return of 5.04% for the year.

Market Commentary

The New Zealand listed property sector (represented by the S&P/NZX All Real Estate Gross Index) fell by 3.85% in the March quarter, again underperforming the broader equity market. Interest in the sector has been subdued for several consecutive quarters and this has continued into 2018 despite a string of very respectable profit results. Reasons for this are multiple and we outline our thinking below.

Most importantly, rising interest rates are often co-related with underperformance in the listed property sector and higher rates globally have certainly removed the shine from listed property. Furthermore, after a long period of capital growth, a period of consolidation was not unexpected. Lastly, the confidence of property investors has fallen following the change in government. This is unlikely to change until the tax review group has reported its findings.

Portfolio Positioning

After an extremely strong run, we believe that the property cycle in New Zealand is at a mature stage - asset values have increased for 6 consecutive years. Investor caution is therefore warranted. Furthermore, rising interest rates will lift the cost of debt whilst new supply in the New Zealand office sector will limit capital growth. In terms of sub-sectors, industrial is likely to be a better place to be than retail and commercial. With these issues in mind, the fund continues to tilt new monies towards exposure to PFI (Property For Industry) and look for opportunities in Australia. The fund has added to its existing exposures in Westfield and Stockland and remains overweight in PFI. Lendlease is another Australian stock exposure that continues to be held by the fund. Together with Westfield, these exposures ensure the fund has leverage to property dynamics not available in New Zealand or Australia. 

Outlook

Rising interest rates continue to hold the sector back but, as stressed in previous commentaries, this was not unexpected. Thankfully, listed property continues to offer excellent dividend yields, significantly above those available in fixed interest markets. By our calculations, the sector yield spread exceeds 10-year bonds by well over 4.0%. Robust economic growth and strong rental demand in most property sectors are other factors that should give investors confidence. Lastly, the recent weakness in the sector means many listed property stocks are now trading below our assessment of asset valuation. Interestingly, recent transactions of physical property support higher valuations on the listed market and we expect the current discount to asset backing to rise by around 6% by the end of 2018. In summary, the sector appears oversold to us.

 

For more information on the Summer Listed Property fund, read the latest quarterly fund update.

This is not a recommendation to buy or sell any financial product and does not take your personal circumstances into account. All opinions reflect our judgement on the date of communication and may change without notice. Past performance is not a reliable guide to future performance. We recommend you take financial advice before making investment decisions. We have prepared this web page in good faith based on information obtained from other sources, but we do not guarantee the accuracy of that information. We do not make any representation or warranty (express or implied) that this web page is accurate, complete, or current and to the maximum extent permitted by law disclaim any liability for loss which may be incurred by any person relying on this web page.