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WRF structures solid fund with liquid features

Property is an important part of a balanced portfolio, but it appears, as Donal Curtin points out in his column that investors are missing out on some decent returns. Where to put property allocations is a tricky question.

Friday, November 17th 2006, 1:14PM
Property is an important part of a balanced portfolio, but it appears, as Donal Curtin points out in his column that investors are missing out on some decent returns. Where to put property allocations is a tricky question.

FundSource general manager Binu Paul says one of the issues facing the sector is that there is not a huge amount of choice for advisers and investors in what he calls the “unitised” product space. He says that some New Zealand funds are closed to new money as they are wound down and others which have been quite large, like the Guardian Trust fund are shrinking.

One option which Curtin talks about is the listed property trust sector. It is an important part of the market and one that investors and advisers should consider.

A benefit of this space is that there are listed property trusts in New Zealand, Australia and other countries. There are other options such as the proportionate schemes which tend to be single property offerings. These have been snapped up by advisers. Also there are funds like what Australian-based WRF Securities are promoting in New Zealand.

The current Property Fund offering is an open-ended fund that aims to buy high-yielding properties, but also hold cash and some listed property trusts.

WRF’s New Zealand representative Aaron Gascoigne says the fund offers investors a number of key features. One of these is its asset allocation as it hold three directly owned properties, cash (around 3%) and 12% of its assets in listed property trusts.

An issue property funds in the past is that they lacked liquidity to deal with redemptions. The problem being if a whole lot came through at once and the fund had no liquidity a manager would be forced to sell assets.

Gascoigne says since the fund has around 15% of its assets in liquid investments it can manage this issue if it arises. Another key feature is that the Property Fund is giving New Zealand investors exposure to the Australian market.

It is a well-documented fact that New Zealanders, generally, have a large exposure to their own country’s property market (exacerbated when investments are also held in vehicles such as mortgage funds which lend on residential property).

Gascoigne is of the view that the closed end property trusts, have to some degree, had their time and there is now growing investor interest in the open-ended funds.

The current fund makes monthly distributions and also there is a secondary market where investors can sell units.

For a copy of the investment statement go to www.wrf.co.nz

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Lender Flt 1yr 2yr 3yr
AIA 4.55 ▼2.29 ▼2.59 ▼2.65
ANZ 4.44 2.89 3.25 3.39
ANZ Special - 2.29 2.69 2.79
ASB Bank 4.45 2.29 2.59 2.65
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.29 2.59 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 2.89 3.19 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 2.50 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.50 3.40 -
HSBC Premier 4.49 2.25 2.35 2.65
HSBC Premier LVR > 80% - - - -
HSBC Special - 1.99 - -
Lender Flt 1yr 2yr 3yr
ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.79 3.04 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.20 3.50 3.50
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.35 2.65 2.65
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
SBS Bank 4.54 2.79 2.79 3.15
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 2.29 2.29 2.65
Select Home Loans 3.49 3.34 2.99 3.34
The Co-operative Bank - First Home Special - 2.09 - -
The Co-operative Bank - Owner Occ 4.40 2.29 2.59 2.79
The Co-operative Bank - Standard 4.40 2.79 3.09 3.29
TSB Bank 5.34 3.09 3.29 3.45
TSB Special 4.54 2.29 2.49 2.65
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - 2.29 2.69 2.79
Median 4.55 2.79 2.99 2.80

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