Forsyth Barr Listed Property Fund
The fund aims to achieve positive long-term returns by investing in selected listed property vehicles, subject to the risks associated with investments in listed property assets.
AS AT 27 Oct 2020
Month End Unit Price
As at 30 Sep 2020
Share markets globally have just finished a second successive quarter of strong gains, despite most regions taking a breather in September. The performance of financial asset prices over the past six months would have surprised everyone when considering the dire global outlook we faced back in March. This is testament to the unprecedented (yes that word again) support given to financial markets and economies in general by central banks and governments around the world. Central banks have committed to continuing their extraordinary levels of liquidity support for the foreseeable future, while many governments are trying to be more nuanced by balancing the type and level of ongoing fiscal support with political realities such as budget constraints and for some, election cycles.
September was the third consecutive month of property outperforming the S&P/NZX 50 Gross with Imputation Index, capping off a strong quarter. The S&P/NZX All Real Estate Gross (with imputation) Index returned 2.70%/13.42% over the month of September and Q3 respectively. The top performer of the month was Stride Property Group (SPG), up 10.90%. Property for Industry (PFI) gained 3.94% after reporting a solid interim result and reinstating its pre-COVID-19 dividend guidance. Vital Healthcare Property Trust (VHP) was up 3.51% over the month as it announced the appointment of a new Chairman, and provided a positive trading update.
Portfolio Performance and Positioning
The Forsyth Barr Listed Property Fund increased 2.53% (Gross Fund Return) in the month of September underperforming the reference index by -0.17%. Over the September quarter, the fund increased 13.18%, again modestly underperforming the reference index by -0.24%. The yearly return of the fund has printed relative outperformance of 1.37%.
Key contributors to performance during the quarter under review included overweight positions in Australian names Charter Hall (CHC), Charter Hall Long WALE (CLW), Centuria Capital (CNI) (inherited from our Augusta overweight position), Goodman Group (GMG) and out of index positions in aged care.
In order to fund these out of index Australian names, we had to underweight New Zealand names. With the NZ Property Index up 13.42% for the quarter, this was always going to cost performance, in particular industrial names Goodman Property Trust (GMT), Property for Industry (PFI) and Argosy (ARG). Whilst industrial names have undoubtedly been least affected by COVID-19 they are certainly priced for perfection at 30-40% premium to NTA, and we remain comfortable with our large underweight positions in GMT and PFI.
During the quarter we added Mirvac (MGR) to the portfolio. We see MGR’s pipeline as very attractive, especially in a low interest rate environment and supported by the Group’s asset creation track record and low gearing. MGR trades on 15x FY21e earnings (in line with LT average, but around 20% below the Australian sector), with an FY21-24e EPS CAGR of around 7%.
While there are many uncertainties surrounding the virus and how long it will continue to disrupt global activity, one thing we do know is that interest rates are going to remain at current or lower levels for some years to come.
Some NZ LPVs went into the pandemic with relatively ungeared balance sheets, while others have sold (or are in the process of selling) assets or raised capital to reduce gearing. With debt costs low, and marginal debt costs even lower with line fees already being paid on unused debt facilities, adding to portfolios is highly accretive. SPG and GMT have recently taken advantage of this spread and acquired assets, Investore Property (IPL) has signalled meaningful acquisitions are on the horizon, while ARG has sold non-core assets at a solid premium to book value. The Australian sector enjoys the same tailwinds, yet is trading on more favourable metrics with stronger growth in earnings. All other things being equal, we expect the next move for the fund will be a further rotation into Australian opportunities as we identify them (currently ~10% of the fund is invested in Australia).
We actively manage the fund’s foreign currency exposures. As at 30 September 2020, these exposures represented 10.39% of the value of the fund and were unhedged.
As at 30 Sep 2020
|Goodman Property Trust||18.01%|
|Precinct Properties New Zealand Limited||13.50%|
|Kiwi Property Group Limited||13.13%|
|Property For Industry Limited||9.58%|
|Vital Healthcare Property Trust||8.11%|
|Stride Property Group||7.19%|
|Argosy Property Limited||7.05%|
|Investore Property Limited||4.54%|
|ANZ transactional bank account||4.06%|
|Asset Plus Limited||2.67%|
|Major holdings as % of total portfolio||87.86%|
|Total portfolio holdings||20|
Performance over time
As at 30 Sep 2020
|1 Month||3 Months||1 Year||3 Years*||Since commenced operation*|
|Net Fund Return||1 Month 2.37%||3 Months 12.79%||1 Year -3.91%||3 Years* 10.86%||Since commenced operation* 7.94%|
|Gross Fund Return||1 Month 2.53%||3 Months 13.18%||1 Year -2.38%||3 Years* 12.85%||Since commenced operation* 9.63%|
|S&P/NZX All Real Estate Gross Index||1 Month 2.70%||3 Months 13.42%||1 Year -3.75%||3 Years* 14.83%||Since commenced operation* 10.59%|
The unit prices shown do not take into account any adjustment for PIE tax.
Net Fund Returns are calculated after deduction of fund charges, trading expenses and accrued tax for a New Zealand resident paying individual tax at the highest Prescribed Investor Rate (28%). Gross Fund Returns are calculated before deduction of taxes and fund charges but after deduction of trading expenses and including imputation credits where applicable. Market index returns do not have any deductions for fund charges, trading expenses or tax.
The S&P/NZX All Real Estate Gross Index (“Index”) is a product of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Forsyth Barr Limited. Copyright © 2015 S&P Dow Jones Indices LLC, a subsidiary of McGraw Hill Financial Inc., and/or its affiliates. All rights reserved. Redistribution, reproduction and/or photocopying in whole or in part are prohibited without written permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit www.spdji.com. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. Neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index to accurately represent the asset class or market sector that it purports to represent and neither S&P Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC, their affiliates nor their third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.
As at 30 September 2020
This document tells you how the Forsyth Barr Listed Property Fund has performed and what fees were charged. The document will help you to compare the fund with other funds.
General Fund Information
Potentially lower returns
Potentially higher returns
The risk indicator is rated from 1 (low) to 7 (high). The rating reflects how much the value of the relevant fund’s assets goes up and down (volatility). A higher risk generally means higher potential returns over time, but more ups and downs along the way. The risk indicator is based on the returns data for the five years to 30 September 2020. See more information about the risks of investing in the Product Disclosure Statement.
Target investment mix
|Cash and cash equivalents||5.00%|
|New Zealand fixed interest||0.00%|
|International fixed interest||0.00%|
Forsyth Barr Investment Management is the manager of the Investment Funds. The comments on this webpage do not take your personal circumstances into account. Before acting on this information, please contact your Forsyth Barr Authorised Financial Adviser. His or her disclosure statement is available on request and free of charge. Forsyth Barr Limited and its affiliates do not make any representation or warranty (express or implied) that this webpage 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 webpage. This webpage is not intended to be distributed or made available to any person in any jurisdiction where doing so would constitute a breach of any applicable laws or regulations.
© 2020 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. Any general advice or ‘class service’ have been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. Refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/s/fsg.pdf. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser.
Get in touch
22 locations around New Zealand
To find out more about our Listed Property Fund, speak to one of our Investment Advisers. They will help you determine the role an Investment Fund can play in helping you achieve your goals.