Listed property's record 'beats cash‚ bonds'
South African investors should add listed property stocks to their portfolios this year because their track record in beating inflation is better than cash‚ bonds and certain other equity investments‚ says Grindrod Asset Management's Ian Anderson.
Grindrod's Ian Anderson says listed property remains an excellent asset class. Image: LinkedIn
Anderson says the listed property sector had performed well despite many asset managers warning, in 2006, that it was too expensive and was heading for difficult times.
"Since 2006‚ when investors were warned to steer away from listed property‚ the sector has achieved on average 20% each year in (total) returns‚" he says.
Anderson says that since the 2008/09 recession‚ too many investors were thinking about the short-term regarding the stocks they bought and changing asset allocations to beat short-term forces in the market.
"While the temptation is to try and time markets by making asset allocation changes to reduce short-term volatility‚ investors are better served staying the course with the asset-class mix that allows them to achieve their investment objective in the long term‚" he says.
Beating inflation
Property stocks were likely to beat consumer price inflation by at least 5% over the next five years according to Anderson. He says equities could do the same but would not necessarily perform as well as listed property.
There was still value in investing in local property stocks compared with offshore property stocks.
"If you strip some of the bigger stocks based in SA such as Growthpoint and Redefine‚ you are left with smaller stocks like Tower‚ which offer tremendous value‚" he says.
However‚ Anderson says there are some offshore stocks that deserved attention. One was Romanian retail company New Europe Property Investments (Nepi) that focuses on shopping centres in Eastern Europe.
"Nepi is well run by a South African team based in Romania. It is part of the Resilient stable. Nepi is walking over the property competition in Romania and I think it is only getting better for the company‚" Anderson says, adding that the yields Nepi was able to secure on development projects exceeded the company's average cost of capital by a large margin.
Gareth Stobie‚ head of capital markets at Grindrod Bank‚ meanwhile says he expects to see more investors buying into passive investments such as exchange-traded products (ETPs).
"ETPs are becoming very popular because of how they expose investors to a diverse group of stocks or an index‚ and these selections beat unit trusts last year‚" he says.
Source: I-Net Bridge
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