According to the latest SPIVA Australia Mid-Year 2025 Scorecard, over the last 15 years, 52 per cent of funds across all categories are no longer active. Australian equity small- and mid-cap funds had the highest survivorship at 56 per cent, while only 43 per cent of Australian real estate investment trusts (A-REIT) remain.
While fund liquidation rates have stabilised in the short term – with just 18 per cent of A-REITs failing to survive in 2024 – some of the recent closures have been high profile, including Neuberger Berman Global Sustainable Equity, BlackRock Global Impact, JPMorgan Sustainable Infrastructure Fund and Pendal Enhanced Credit Fund.
Chris Gosselin, CEO of Fund Monitors, said fund closures were an ongoing feature of the Australian market.
“Unless a fund can attract sufficient investors and funds under management, it is unsustainable over time,” he said. “Funds are constantly closing and there’s always a new manager from an existing organisation wanting to go out on their own.”
According to him: “The reason for lack of FUM can be as simple as poor marketing and distribution, lack of research coverage, poor performance and, less frequently, fraud or outright failure.”
The high volume of A-REIT closures raises broader questions about the sector, which SPIVA found has had the highest proportion of fund exits over three, five, 10, and 15 years.
Dugald Higgins, head of responsible investment and real assets at Zenith Investment Partners, said A-REITs’ decline is likely driven by multiple factors.
“Part is market headwinds. Rising interest rates in 2022–2023 hurt valuations, and structural challenges such as appetite for office demand post-COVID added uncertainty,” Higgins said. “Part is structural, increasing predominance of money moving to passive strategies in A-REITs means that when market headwinds arrive, more money tends to move out due to sector rotation taking place”.
Regarding closures because of underperformance, Higgins said the ASX 300 A-REIT Index was hugely concentrated, with 10 stocks making up more than 85 per cent of the market.
“You can get one call wrong and dynamite your performance,” he cautioned. “It doesn’t mean managers can’t outperform, far from it, but it’s challenging and no active strategy will outperform all the time.”
Higgins also cautioned that the ongoing shift from REITs to private markets carries its own risks.
“Money is undoubtedly pouring into private markets across credit, equity and to a lesser extent, infrastructure… This is less about the funds and more about sector rotation out of real estate.”
Gosselin added that A-REITs are a specialised segment, heavily influenced by the economy, interest rates and the property market.
“They shouldn’t be put in the same asset allocation basket as equities or bonds,” he said. “While long-term returns are similar, the sector is highly cyclical, and risk-adjusted returns are lower relative to general equities, creating challenges for portfolio construction.”
