Guy Barnard, Co-Head of Global Property Equities, provides an introduction to the Global Property Equities Strategy. The high conviction, actively-managed strategy invests in listed property stocks and real estate investment trusts (REITs), and aims to deliver attractive total returns to investors over the long term.
What does the strategy offer to investors?
The strategy offers investors an opportunity to benefit from the attractive characteristics of global property, namely a real asset with a high and growing income yield. It does this through investing in listed property companies which we feel offer a liquid, diversified and low cost way of accessing the property market. Our investment universe has grown significantly in recent years, through the growth of the tax efficient REIT regime, and as a result we now have more than 500 companies globally which we would consider investing in, and a free float market cap of those companies in excess of $1 trillion. So the REIT regime really has been a tremendous success that is providing attractive, tax efficient returns for investors, and for us as active managers it is creating a deep pool of opportunities which we can look to exploit.
What does the strategy invest in?
Our strategy focuses on bottom up stock selection to be the key driver of alpha. We feel as investors you should really place as much emphasis on the area where you think you can add consistent value over the medium and long term, and that for us is really bottom up stock selection, given our focus on understanding property markets and understanding the management teams of the companies in which we can invest.
Describe the investment approach
We benefit from a truly global team. We are a team of eight dedicated investment professionals. We only invest in the property sector. It is all that we do. And we have a team that is based in each of the regions in which we invest. So we have investment professionals in London covering Europe, Singapore covering Asia Pacific, and Chicago covering the North American markets. The result we feel is a team that is able to identify the best bottom up stock opportunities from around the world and really look to bring those together into one highly concentrated, high conviction portfolios which is going to generate the best returns for clients over the medium and long term.
How is the investment team structured?
As active managers, we believe it is important to do just that, i.e. be active, so when we are constructing our portfolios we are looking to put together a concentrated, high conviction portfolio with a high gross active share. We feel that means that the best ideas that we have globally are going to have a meaningful impact on the overall fund performance. So typically you will see us holding 50 to 60 names in a global fund with a gross active share, so a measure of that bottom up stock risk, of typically around 70%. We feel that’s different from peers, we are very comfortable being different. Doesn’t always mean we sleep comfortably, given the high conviction we are taking, but we do it because we believe it’s going to generate the best returns for investors over the long term.
What makes the strategy unique?
We understand that investors have a wide range of investment choices today in terms of asset classes and products, and for us we really advocate real estate forming part of a balanced portfolio. The inclusion of real estate will typically enhance the risk return characteristics of a portfolio, so investors will get a higher return for the same level of risk.
What are the benefits of including property equities in a portfolio?
I think combining the attractiveness of the asset class with our approach as active managers, which we really see as only becoming increasingly important given some of the structural trends that are playing out in markets globally, we think should warrant inclusion in many investors’ portfolios.