A fund manager typically cuts management fees to pacify investors suffering poor returns. That’s definitely not the case with APN’s Global REIT Income Fund, which is celebrating its first birthday and has enjoyed a year of solid performance since its initial launch on the 1st April 2020 (total return of 17.54%1 for this first year to 30 April 2021).
Nor was it the case when we cut the fees of the APN Asian REIT Fund in 2016. So why are we temporarily reducing the management fee of our new Global REIT Income Fund by 50%?
In a word, opportunity. The Fund’s launch coincided with the start of the global pandemic. With uncertainty hovering over the future of shopping centres, in particular, CBD offices (see Commercial property lessons from the pandemic, one year in), commercial property is one of the few sectors where share prices have yet to fully recover from the lows of last year.
Many REITs look cheap by historical standards. Of course, some deserve to be, but we’re finding plenty of property trusts trading at discounts of 25% or more to intrinsic value. Select global REITs now trade at lower multiples compared with global equities, offer wider yield spreads to US Bonds and sport implied value discounts compared with private asset values.
This is an environment laden with opportunity, not just in terms of the sustainability of the Fund’s current running yield, but also in the potential for capital growth. It’s the individual, stock-driven opportunities, currently thick on the ground, that excite us the most with our profitable approach to preferred securities a good example.
The second reason to consider the fund concerns diversification. Whilst many investors understandably orient their income portfolios to Australian REITs due to their generally higher distributions, the local REIT sector lacks the depth and diversity of international markets.
There are, for example, 15 dedicated healthcare REITs in North America alone, in Australia there are currently none. There are also multiple opportunities to invest in growth-orientated REITs focused on specialised sectors aiding digital transformation like mobile phone towers and data centres. An investment in APN’s Global REIT Income Fund opens the door to improved portfolio diversification, both at the geographic and sector levels.
We hope that by temporarily reducing our management fee, investors seeking enhanced diversification, regular income and attractive opportunities for capital growth will think more deeply about how their portfolios might benefit from careful exposure to the global REIT market.
Offering better diversification, a current distribution yield of 3.86%2, paid monthly, and attractive opportunities for capital growth, it’s a great time to take a closer look.
- The APN Global REIT Income Fund currently charges a management fee of 0.98% pa.
- A special 50% reduced management fee will apply for all existing investors and any new applications made by 31 July 2021
- The management fee reduction will apply for two years from 31 July 2021 until 31 July 2023. After 31 July 2023, the management fee will revert to 0.98% pa.
- The benefit will be paid by way of bonus units which will be issued quarterly at the prevailing unit price at the time.