NZ Fund Managers

[Snoopy]

The numbers game gives the win to Solly (post 102). My detective work gives investors a good idea of how the winning strategy was played out (posts 102 and 104). So we have a result! Solly and his Harbour Asset Management Real Estate Fund is the place to put your real estate capital!

Or is there more to consider?

There are a few more NZ Real Estate Funds out there. I don't disown the 'index plus' approach to setting up these real estate funds. But I did wonder if there is anyone else out there running an NZ Property Fund based on a different strategy. The main problem with the three protagonists that I have looked at in detail is that together they account for around 30% of the total listed NZ real estate market (around 10% each). When you are that big, it is difficult to deviate too far from 'index plus'. I wondered if there were any smaller operators out there, pursuing a different strategy?

I came across 'Mint Asset Management'
https://www.mintasset.co.nz/our-fund...property-fund/

Despite the name, the 'Australasian' property fund is heavily weighted towards NZ's 'big eight' listings (totalling 91.86% of the fund). But at just over $28m, it is less than one third the size of any of the other three protagonists examined so far. Yet if you click on the latest fund update and compare the fund composition with the NZ Real Estate index constituent rating (post 99), you will see that 'Mint Asset Management' is 'index plus' as well. For the record the Mint Management version of 'index plus' means a 2 percentage point underweight position in both KPG and VHP, with IPL also down 1.5 percentage points. PCT is up by a percentage point as is SPG. 'Rogue declarations' outside of the core eight are Charter Hall (real estate) and NEXTDC (data-centres) in Australia. The annual management fee at Mint was 0.98%

As an aside, Solly's previous employer was Mint. So you could say that in moving to Harbour Asset Management, this was for Solly merely an exercise in 'continuing to do everything he had been doing'. That means, the way I see things, it does come down to which of the 'index+' market players I see as best. Currently I hold none of the big eight underlying investments from which our respective fund managers make their lunch. So I feel I am in a position to judge the merit of the eight protagonists from a value perspective today without any 'anchor baggage'.

The most important thing to consider is how these property funds have positioned themselves for the future, not to get hung up on past success or under-performance. For that you need a vision of where DARP (Demand at a reasonable price) will come from.

My top preferred NZ property sector investments are:

1/ Property for Industry: Big box industrial and logistics (sectors I like) at a good yield from quality underlying earnings (a higher percentage of imputation credits earned than most). A good track record of 'sticking to their knitting'.
2/ Stride Property Group: Tarnished with their inability to sell down their office portfolio with the failed 'Fabric' float, Stride's long term aim is to be a 'management ticket clipper'. Others put up the equity to actually own the properties under management. It is such a profitable plan, that buying out profitable management contracts held by outsiders was lauded as the thing to do by many of the top eight market players over the last few years. Stride is not a full PIE which might put some property investors off. But for me tax matters are a consideration, not an over-ruling command for where I put my investment dollars.
3/ Argosy: Trying to cover all categories of property investing (office, industrial, large format retail). But the with tilt towards big box industrial (53% of the total portfolio) and some retail (9%) that attracts me. Leaving aside Kiwi Property, which has become more of a property developer and will likely reduce dividends soon to fund their 'live work and shop' at one site new development vision, Argosy gives investors the highest dividend yield.

Almost making my top 3 was Investore, as I like the recessionary proof big box grocery sector. Countdown (Inverstore's biggest tenant) does play 'hard ball' though, with their rent contracts. I got worried when Investore announces rental lease deals at rates below the cost of bank funding! I need to look into margins at Investore a bit further. Kiwi Property is a 'roll the dice' investment with lots of development and execution risk. Goodman Property Trust a great company in a good sector, but very fully valued. Ditto for Vital Healthcare. Precinct are the big player in office towers, which I see as a sector coming under pressure in the near term - with government departments set to shrink - and in the long term with greater acceptance of 'working from home.

And the fund winner is.......

SNOOPY