“The ‘Recommended’ rating indicates that Lonsec has strong conviction the financial product can generate risk-adjusted returns in line with relevant objectives and that the financial product is considered an appropriate entry point to this asset class or strategy,” Lonsec says.
Mr Ryan Banting, head of portfolio management with AUREI, says the new rating is timely as the current low interest rate environment sees many investors re-evaluating their income producing investment options.
Established in 1999, the Fund invests in a diverse mix of commercial property investments including direct assets, unlisted funds and listed property securities.
“Since its inception, the Fund has provided regular and consistent income distributions, low volatility, and daily liquidity. In line with its ‘no surprises’ and risk-aware investment approach, the Fund delivered an income distribution yield of 8.55 per cent for the 12 months to 31 May 2015*,” Mr Banting says.
“The Fund is suitable for accumulators with modest balances, investors using a ‘core and satellite’ approach and for retirees in draw down phase”.
“Importantly, by not borrowing to invest, the Fund eradicates portfolio risks of lending covenant breaches, negative interest rate movements or refinancing difficulties,” Mr Banting says.
The Lonsec report noted that the Fund has performed well over the long term and has displayed strong defensive and low risk characteristics. Importantly, the report also identified Australian Unity Real Estate Investment as a well-regarded and experienced investment team.
“It is one of a small number of non-institutional unlisted property fund managers that came through the global financial crisis without reputational damage,” Lonsec states.
“The Fund benefits from an experienced property team providing exposure to a portfolio of diversified property assets. The Fund's rating is underpinned by Lonsec's positive regard for the conservatism and experience of the Fund's investment team. Further, historically the Fund has displayed lower worst drawdowns, lower levels of volatility and better liquidity than peers.”
“Over seven years to February 2015, the Fund's volatility (as measured by standard deviation) was a low 4.84 per cent p.a. with a worst drawdown of 15.41 per cent.” Lonsec says.
“Through investing in a range of different property assets and cash, the Fund aims to maintain a solid level of liquidity, generally enabling investors to request withdrawals when they choose,” the Lonsec report concluded.
*Total return for the Fund for the 12 months to 31 May 2015 was 16.64% (Distribution Return 8.55%, Capital return 8.09%). Past performance is not a reliable indicator of future performance.