The trend of Australian investors allocating towards global and domestic real estate investment trusts (REITs) and away from purely domestic REITs has solidified over the past 12 to 18 months.
Principal Global Investors (Principal) experienced new flows into its Global Property Securities Fund totalling more than $115 million in the fourth quarter of 2012.
“We have had further indications of these types of flows into global property securities in Q1 2013,” Principal managing director Grant Forster told InvestorDaily.
“At some point, we would expect this institutional trend to become better established in the retail sector – especially as cash rates remain low and single company stocks such as Westfield dominate domestic-only portfolios.”
Mr Forster also identified that fresh demand is coming to the market from first-time institutional investors in global real estate securities from Europe, China and the rest of Asia as well as other emerging markets.
“The Japanese continue to be very yield-orientated, with strong demand from Japanese retail distributors for yield product. This includes interest in global property securities,” Mr Forster said.
In November, Principal Real Estate Investors’ real estate executive director, Pat Halter, said investors should consider taking a dollar cost averaging approach to investments in light of anticipated flow increases.
“Start to make some investments in this marketplace, then build on those investments over time. [This] allows you diversification in terms of the timeframe you’re investing in,” Mr Halter said.
“Long term, real estate and global REITs will produce a very adequate and satisfying return, so take a risk-control, risk-managed approach but start to invest in the space now.
Mr Forster also said in November that investment into the global REIT sector would allow investors in Australia to have diversification offshore that they aren’t able to achieve elsewhere.
“At the same time, a lot of advisers are saying ‘this is a great cornerstone for the superannuation-type client’,” he added.
“So if there is a general belief to increase that exposure, getting global offshore just makes sense.
“It’s very difficult for Australians to go and get a meaningly diversified offshore property holding. This is a liquid and very easy way to do it,” he said.
