Nedgroup Investments is excited to announce the launch of the Nedgroup Investments Global Property Fund, which will be available to investors from July 2016.
Nedgroup Investments has appointed Resolution Capital as the Sub Investment manager for the Fund. Based in Sydney, Resolution Capital is a specialist investment manager with primary expertise in managing global listed real estate securities. Their disciplined investment process emphasises a global sectoral perspective and focuses on long-term wealth preservation and appreciation.
The Nedgroup Investments Global Property Fund is modelled on Resolution Capital’s Global Property Securities Fund (Unhedged), which is their flagship Australian domiciled mutual fund. The fund aims to offer investors exposure to global listed real estate securities through a professionally managed portfolio of global real estate investment trusts (REITs) and other property-related companies. The fund will thus be suitable for investors who require sector specific exposure to global real estate securities as part of their overall investment strategy.
We invited Andrew Parsons, Managing Director and Global Portfolio Manager at Resolution Capital, to tell us more about Resolution Capital and what they do.
Andrew, we are delighted to have you and the team on board to manage the Nedgroup Investments Global Property Fund, to complement our Global Best of Breed range. Resolution Capital has an impressive track record in managing global listed real estate securities mandates. Tell us about how you have managed to achieve this.
We are a specialist global real estate securities manager with a successful long term investment track record and strong fiduciary culture. Our global investment track record is now approaching 10 years, although the team has a heritage of investing in Australian real estate securities for over 20 years. We are a value-oriented investment manager with the objective of delivering superior risk-adjusted returns over the long-term relative to recognised industry benchmarks.
This is achieved through investment in a concentrated portfolio of carefully selected listed real estate securities with an emphasis on avoiding a permanent impairment of capital. This aligns the investment process and security selection with clients’ objectives of long-term real wealth creation and avoids the culture of index hugging.
By judiciously filtering out stocks that, in our opinion, are not capable of safely delivering above average riskadjusted returns, we can achieve the investment objective of protecting and growing our clients’ capital over the longterm. The long-term investment focus has served clients particularly well in more challenging markets. It is also worth noting that an outcome of our long term approach has been below industry levels of portfolio turnover.
The chart below highlights the cumulative performance of our flagship global strategy (pre-fees) since its inception in December 2006.
Part of your successful track record can be attributed to yourstrong emphasis on capital preservation (which incidentally, is a characteristic Nedgroup Investments tends to favour in our manager selection process!). Does this mean you tend to under-perform in strong markets?
Resolution Capital’s global track record will surpass 10 years in December 2016. Since inception, it has delivered industry leading returns. Historically, the strategy has produced greater relative performance in down markets. While also participating in rising markets, our value-oriented approach means the strategy has typically outperformed more often in challenging market conditions when protecting and preserving client capital is more critical than in short-term, momentum driven markets.
Your mandate is to invest in global real estate securities. Given the wide array of potential investment opportunities from which to choose, how do you narrow this down into something more manageable? Or is your starting point for constructing the portfolio simply the fund’s benchmark i.e. the FTSE/EPRA NAREIT Index?
Our investment process is focused on identifying those stocks which we expect will deliver the best relative riskadjusted returns. Thematic investment screens that are debated and tested internally provide a means of filtering our investment universe down to a subset of stocks (approx. 150 stocks globally) which then undergo more detailed research. The core of our detailed research is focused on evaluating the relative value of the company, its management team and the risks associated with the investment.
Primarily through bottom-up research, we seek to identify and invest in a select group of high quality stocks with unusual characteristics that the market continually underappreciates. Our stringent filtering process focuses on identifying and exploiting three key attributes:
1. High barrier property markets where landlords have pricing power;
2. Strong balance sheets which can successfully withstand and exploit market cycles; and
3. Management teams with skill, discipline and alignment.
To ensure focus on these attributes, we construct concentrated portfolios consisting of no more than 55 stocks at any one time. While we are benchmark aware, our portfolio construction is benchmark agnostic.
Resolution Capital considers its use of the Multi-Councillor approach, and that your analysts are sector research specialists, as opposed to geographic specialists, as some of your key differentiators from your peer group. What advantages do these approaches offer?
Resolution Capital pioneered the Multi-Portfolio Manager (Multi-PM, otherwise known as Multi-Councillor) system in the global real estate securities sector when we launched our global strategy in 2006. While this approach has been adopted more widely in other asset classes (particularly equities), it is fairly unique in this sector (i.e. global real estate).
Our Multi-PM system has been designed to enhance team interaction, strengthen accountability, ensure stringent peer review and promote the long-term stability of the investment strategy. This system is well suited to our concentrated approach as it helps engender conviction in a smaller number of stocks.
There are currently four experienced portfolio managers managing the global strategy. Each portfolio manager invests across all sectors and regions, thereby ensuring peer review, promoting idea generation and cross-sector comparisons, while also building in additional capacity via sector and stock familiarity in the event of staff turnover.
With regard to research, we have adopted a real-estatesector based (e.g. retail, office, industrial, hotels, residential, self-storage etc.) research approach on a global basis. This is in contrast to the typical approach adopted by peers of geographically or regionally siloed research. Our proprietary research normalises regional differences in financial reporting practices and valuation methodologies so that we are able to compare companies on an ‘apples-to-apples’ basis across the globe.
We believe our approach enables us to identify ‘the best of breed’ real estate platforms and understand broader industry trends which are becoming increasingly global.
Thank you, Andrew, for sharing these insights with us. We look forward to a long and successful partnership with you and the team.
The Nedgroup Investments Global Property Fund (managed by Resolution Capital) offers investors an excellent means of gaining exposure to the underlying returns of some of the world’s highest quality real estate assets through a professionally managed portfolio of global real estate investment trusts (‘REITs’) and property companies.
Nedgroup Investments is proud to offer our clients exclusive access to Resolution Capital’s global real estate (unhedged) investment expertise via 2 FSB approved access points:
- Nedgroup Investments Global Property Fund (USD denominated, domiciled in Ireland)
- Nedgroup Investments Global Property Feeder Fund (ZAR denominated, domiciled in South Africa).