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Russell backs global property sector World's largest multi-manager recommends revised exposure to global and local property assets; launches new global property fund SYDNEY, 24 January, 2005 — Global investment and superannuation specialist, Russell Investment Group, today announced the results of its review of the global property sector, recommending investors limit exposure to Australian Listed Property Trusts and increase exposure to strongly performing global property vehicles such as Real Estate Investment Trusts (REITs). As part of the review, Russell will alter the asset allocation of its range of diversified funds, increasing the exposure to international property assets to 5 per cent for the Russell Diversified Fund and 3 per cent for the Russell Balanced and Growth Funds. Russell also announced the official launch of the Russell International Property Securities Fund - $A Hedged, a hedged, multi-manager, multi-style fund which gives Australian investors exposure to a diversified portfolio of international (ex-Australia) listed property securities. The fund has been seeded with $80 million from three clients, including Russell. The Russell diversified funds will invest through this new specialist fund, making Russell one of the few managers to offer a specific allocation to global property. Mr Peter Gunning, Chief Investment Officer for Russell Investment Group in the Pacific Basin, said as a general rule Russell now recommends investors split their property exposure 50/50 across domestic and international assets, with a maximum 5 per cent exposure to the Australian LPT sector. He said the revised recommendation gave Australian investors diversification from local property assets and crucial relief from stock specific risk caused by dominant stocks such as Westfield Group. "Our recommendation is to reduce the current exposures to Australian LPTs to around 5 per cent, with the balance of 3-4 per cent to be invested in a suitable REIT product," Mr Gunning said (a roughly 50/50 split given around 25 per cent of LPT market has exposure to offshore assets). "Our analysis has shown that global REITs have similar investment characteristics to Australian LPT, in that they are liquid publicly traded securities with core property as the predominant underlying assets and relatively high dividend yields. Over the long term we would expect very similar levels of returns to LPTs, with the benefits of strong diversification and low correlation of returns with other assets," he said. Mr Gunning said Russell's global manager research team meant it was not reliant on forming alliances with offshore property managers, but was free to hire and fire managers based on their approach and performance. "Our extensive team of global property research analysts puts Russell in a unique position in this market and we aim to leverage this capability to deliver Australian investors the most sophisticated access to global property available," Mr Gunning said. As the majority of Australian investors already have adequate exposure to Australian property assets the Fund has been structured to be ex-Australia. It specifically provides exposure to propertyrelated companies listed on international stock exchanges (i.e. North America, Europe and Asia). The Russell International Property Securities Fund - $A Hedged will combine complementary investment approaches of three managers - AEW Management and Advisors, which employs a valueoriented contrarian investment philosophy seeking to purchase REIT stocks that are priced below their intrinsic value; Invesco Institutional (N.A) Inc, which employs combined top-down fundamental market research and bottom-up quantitative securities analysis; and Morgan Stanley Investment Management, which favours a value-oriented approach incorporating top-down analysis on the relative attractiveness of regions and sectors with a bottom-up approach focusing on net asset value. The Fund seeks to outperform its benchmark (the UBS Warburg Global (ex-Australia) Investors Net Index - $A Hedged) with above average consistency and with lower tracking error relative to other managers. The goal of above-average consistency is achieved by combining strategies with different payoffs over different phases of an economic and stock market cycle. "We have observed that some managers perform better in bull versus bear markets, in growth versus value markets, or in property-focused markets versus equity characteristic driven markets," Mr Gunning said. "The goal is to reduce dependency on a particular scenario by creating an aggregate portfolio of managers which provides opportunities to outperform across different market environments."			Printer friendly version of this page

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