Classically 1980s and at times very ‘un-PC’, the Crocodile Dundee movies remain very memorable to at least a couple of generations of Australian movie watchers. In particular, the ‘that’s not a knife’ scene is a bit of a favourite, with Mick Dundee, played by Paul ‘Hoges’ Hogan, despatches a would-be mugger with a flick knife with his significantly larger croc hunting weapon to save the day.
‘Knife? That’s not a knife!’
Context can be everything and it might seem a stretch but a common initial response to investors looking at APN’s Asian REIT Fund is a case in point. Advisers often remark: “Asian commercial property? That’s pretty ‘niche’ isn’t it?”. In one sense, they’re right, of course. APN is the only fund manager in Australia specialising in Asian listed commercial property, and fair enough, it may be a bit narrower than investors would ordinarily consider when thinking about asset allocation.
However, a bit more digging and most will appreciate that what may seem like a niche on the surface is actually a lot larger in reality. The Asian listed property market is three times the size of the Aussie listed property sector. It also has stricter rules to protect investors and is growing at about four times the rate of our local market.
With 87% of the world’s next 1 billion members of the middle class, according to analysis undertaken by the Brookings Institution in October 2018, one might seriously ask which is the real niche: Australia or Asia?
APN Property happily makes the case for both. APN’s AREIT Fund has a decade-long history of delivering stable, attractive returns to Australian income investors. With over $1.3bn in funds under management, you may say it’s our flagship product.
Then there’s APN’s Asian REIT Fund. Launched in 2011, it recently passed $50m in funds under management, delivering investors a strong, regular income stream as part of an annualised total return of 15.5%1 since inception (July 2011) and 28.9%1 for the year to 30 June 2019.
As CEO of APN Property Group, I’m delighted with these returns, particularly the regular, income-focused investment performance over the last eight years. I also know that these things take time and we would not necessarily expect returns of roughly 30% per annum year in year out given we have a focus on generating returns with lower than market risk (for example through focusing on more passive rental earnings). We are also pleased that the Asian REIT Fund is rated 4-stars by SQM Research2 and has recently been awarded an Investment Grade from Lonsec Research3.
Investing in Australian listed property trusts took many years to really get going. I’d be surprised if that wasn’t the case with Asian REITs; we’re naturally more comfortable with what we know and that’s certainly an important consideration when investing.
At the same time, some of the best investments are unlikely to be on everyone’s radar. We expect it will take time for the APN Asian REIT opportunity to be fully appreciated by investors, although it seems the tide is slowly turning and the fundamentals that we have liked since 2012 are starting to be more widely understood.
For a few years, we believed our Asian Fund may well have been ahead of its time. But as the Fund continues to grow and deliver on its investment objectives, Australian investors seeking reliable income (from rents) are increasingly prepared to look towards Asia’s high quality commercial real estate assets to gain international exposure.
As active investors that focus on fundamental performance drivers, we’ve had a positive view on Asian listed property for years. It’s great to see more Australian investors looking at the sector, not as a niche play, but as a significantly large market opportunity for inclusion in their portfolios for both income and growth potential.
Niche? Asia’s not niche. The APN Asian REIT Fund has a clear purpose, a razor sharp track record and unlocks an opportunity in the fastest growing region in the world. In a few years’ time we expect it to be far bigger than it is today.