Listed Property: Prudent stock selection crucial
|Viewpoint: Listed Property Update
Prudent stock selection crucial to generate active returns in the listed property market
- The strong performance of the SA listed property sector in 2011 continued in the first 4 months of 2012.
- The Investec Property Equity Fund generated positive active returns for the period as our positions taken in 2011 came to fruition.
- We are confident that the sector will continue to deliver decent real returns, but prudent stock selection will be crucial.
- There are a number of headwinds however the sector offers reasonable value, especially considering that an alternative asset class such as cash provides a real yield of 0%.
- An emphasis on buying high quality companies with superior distribution growth, will continue to drive our improving active return profile.
Prudent stock selection will be crucial
The strong performance of the SA listed property sector in 2011 continued in the first 4 months of 2012 with the asset class returning a healthy 10.9%, better than domestic equities, bonds and cash. While the sector’s returns were attractive, it was even more pleasing that we generated returns well ahead of the average of our peer group over this period. Our strong performance was thanks to active positions taken in 2011 that came to fruition and our ability to capitalise on an increase in corporate activity.
Looking forward, we are confident that the sector will continue to deliver decent real returns, but prudent stock selection will be crucial. In general, the sector offers reasonable value, especially considering that an alternative asset class such as cash provides a real yield of 0%. However, there are a number of headwinds facing the sector. These range from global macroeconomic uncertainty to rising administrative costs and an oversupply of space in certain sectors, such as offices. Our experience in the market coupled with an emphasis on buying high quality companies with superior distribution growth, will continue to drive our improving active return profile.
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