By FERGUS SHAW
Within the Cerno multi-asset portfolios, the property asset class is generally accessed via Real Estate Investment Trusts (REITs), classified as Steady Return within our asset allocation parameters.
This is due to our favoured areas of the property market typically offering capital values which are reasonably stable while return is generated in the main through rents and rental growth.
To-date, our allocation has had a highly focused approach within the UK property arena. As global allocators, an international property investment provides added diversification and improved return potential. With this in mind, we have made an allocation to the B&I Asian Real Estate Securities Fund.
Asian property markets offer several attractive characteristics. The key markets of Japan, Hong Kong, and Singapore suffer supply constraints in key sectors largely driven by geography, this is supportive of capital values. Meanwhile Australia is recognised as having the most developed REIT market outside of the US. Ongoing development of the region is opening new markets to the international REIT investor, most recently the Philippines.
The diversity, depth and rapid development of the Asian REIT market requires a specialist, active approach. This is exactly what is delivered by Charles Isaac and Christian Bernasconi, the founders of B&I and investment managers of the Asian REIT Fund. We have known Charles and Christian for much of their careers and have observed them develop as highly capable, specialist REIT investors. They maintain strong relationships with REIT management teams and only invest in REITs with the highest standards of corporate governance. They focus on REITs which consistently grow the dividend per share, and this delivers a portfolio of high-quality property investments and excludes REITs which seek to grow at the expense of income. This approach mirrors our own beliefs on the most reliable approach to REIT investment. The fund has retained its ability to invest in the most attractive medium sized REITs where the team’s edge is most evident by limiting asset flows into the strategy. The resultant portfolio has generated returns well in excess of the broad Asian property market.
The current period of turbulence has resulted in market prices for REITs experiencing high levels of volatility and this in turn has provided an attractive entry point for Cerno multi-asset portfolios.