There are a number of ways for investors to get into property, via REITS or LPT's is one way, or unlisted trusts of funds, another way is direct property where you invest directly in the physical asset usual in a "unit" for example.
Atchison consulting undertook analysis of Direct Property as a part of an investors investment mix (we quote their research often, and again in the following article it is easy to see why). In their research which accounted for 10 year and 20 year returns, cost per $100,000, volatility and risk for reward they noted that - for example; if a an investor had 25-30% of their portfolio in "direct property", the risk of negative returns went from 1 in 10 years to 1 in 44.
To get exposure to property; which is Australia's largest asset class, you don't have to invest in REIT's and LPT's - and clearly the returns haven't been there for the past 10 years with 2.8% per annum; direct property can be invested in via a manager or preferably, why not buy direct property yourself (by passing the fund or trust) and get the full benefit of time in market, income growth, tax advantage and wealth creation (capital growth). Funding costs are much lower than leveraging into the stock market as well.
Understandably you need to buy an asset that will provide smoothing through cycles and that fits your invest style and risk profile. That's why it pays to invest in property advice, the same advice you will pay for indirectly when you invest in a REIT, LPT, Listed/Unlisted Fund for example.
The benefit of investing in property advice, is that unlike an invest manager working for a fund - whose decisions will usually be driven by technical rather than fundamental analysis and the "numbers" (including gearing and valuations); you will get tailored recommendations and advice that fit your specific requirements and meet your budget, giving you total control over "your direct property investment" and you wont pay on going fees either.
The article taken from the Financial Standard today reads;
A number of super funds including Professional Associations Super, Asset Super, Sunsuper and AustralianSuper have added their exposure to direct property in recent months, Rainmaker research shows.
Direct property is back en vogue as investors look outside listed real estate and lock in higher returns - and a quick glance at the numbers show the reasons why.
Rainmaker analysis of returns over rolling 12-month and 5-year periods noted that direct property has been significantly less volatile than its listed counterparts since the GFC. It also delivered higher returns.
For example, the Financial Standard WS Direct Property Index has outperformed the ASX200 Accumulation Index and the ASX200 A-REIT Index in 2, 5 and 10 year periods to June 30th, Rainmaker figures show.
Over a 10-year period, direct property has returned 8.8 per annum, more than treble the returns of listed property over the same period, with 2.8 per cent.
Meanwhile, the correlation between listed property and conventional equities has increased dramatically since the GFC, undermining claims that LPTs offer investors diversification from equities.
David Hartley, chief executive of $15 billion plus industry fund SunSuper, said that the role of direct property in his portfolio had been validated by its performance during the GFC.
"Our direct property got marked down in value (during the GFC) but the cashflows remained pretty solid,' he explained.
SunSuper has over $1 billion invested in domestic property and all of it direct, with Hartley confirming the fund does not have any exposure to A-REITs.
He said that in the asset allocation process, REITs did not necessarily offer enough of a difference to ordinary equities.
"Why would it be REITs, why not tech, or resources? What's so special about REITs when they have been converted from the underlying property into something quite different?" he asked.
John McDuling
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