Why consider Asian and Global Property Securities?

First State Investments today confirmed the main points John Snowden, Head of Property Securities, Colonial First State Global Asset Management made during discussions regarding the changing world of global and Asian property securities.

John Snowden also commented on the benefits funds such as the First State Global Property Securities Fund and the First State Asian Property Securities Fund can offer investors within a diversified portfolio.

John Snowden said “The global property market is offering managers like us so much more in terms of the depth and quality of real estate managers available to invest in than it did 20 years ago. Markets such as the US and Australia are very mature but we believe that the markets with the strongest fundamentals, and where the real opportunities lie, are in the expanding Asian REIT (LPT) markets and in Europe, which is seeing the emergence of REITs in Germany and the UK from January 2007.

“We believe that markets frequently fail to price real estate securities efficiently. Opportunities to add value arise when discrepancies develop between market prices and our own views of relative or absolute values within our universe. The emergence of Real Estate Investment Trusts (REITs) and increased securitisation of property assets around the world provide the driving logic to invest in these markets.

“Favourable taxation concessions offered to REITs are a key factor in the growth and rising demand for global REIT securities. In return for these tax breaks, REITs have an obligation to maintain high dividend payouts, typically having to make distributions between 85% and 100% of profits. This high dividend potential is another attraction for many investors.”

What are the benefits of Property Securities to investors?

The defensive nature of the income component coupled with potential for strong capital growth.

They have an attractive yield for investors given the current moderate inflation environment.

Funds invest in a well diversified sector made up of various relatively uncorrelated industries including: office, industrial, residential, leisure and retail (this provides significant diversification within the asset class).

They have diversification benefits from traditional equity and fixed interest markets.

They enable investors to gain exposure to property markets without having to buy physical property.

Investors are able to participate in the commercial, industrial and retail real estate market without the associated problems of illiquidity, property maintenance, and the lack of diversification that typically accompany direct ownership of properties.

John Snowden continued, “The changing landscape of the global property universe is set to continue and is expected to grow to A$1.3 trillion by 2011.

“Australia has the largest, and one of the more mature REIT markets, but this is likely to be overtaken by Japan in the future even though the REIT market in Japan is still immature. Asia continues to benefit from the changing retail patterns which have opened up the creation of mall assets in Japan and China whilst the hotel, logistics and industrial property are all growing sectors in the region. We expect to see a REIT style legislation launched in China and India within the next decade whilst the emergence of REITs in Europe is a key development which investors will be able to take advantage of in the short-term.

Graham Fox, Head of UK and European Wholesale said “The launch of the First State Global Property Securities Fund and the First State Asian Property Securities Fund in September reflects our belief that listed property securities present exciting investment opportunities, and that our investment experience provides us with the ability to add value in this sector. Property has become a relatively mainstream asset class, and the liquidity and diversification benefits of listed property securities provide an attractive means for investors to get exposure to the property sector.“