BDO Private Wealth is pleased to introduce our new Meet the Manager series. In these interview-style videos, Wealth Adviser Kelly Kennedy will deep-dive into key issues with Australian fund managers, from their investment philosophies to their take on topics such as Real Estate Investment Trusts (REITs), interest rates and diversification.
In the first edition, we are pleased to have portfolio manager Julian Campbell Wood from Resolution Capital Global Property Securities Fund. Julian joined Resolution Capital in 2013 and has over 18 years’ experience in the real estate sector.
The global strategy at Resolution Capital was started in 2006, with the Global Fund launched in 2008, right around the global financial crisis (GFC). They’ve seen a number of different economic environments and economic cycles over almost 15 years.
Resolution Capital's Investment Philosophy
Resolution Capital are investing in global listed real estate, looking at investing in listed rates as a means to access high-quality real estate in major markets around the world which happen to be listed on the Stock Exchange. Their investment philosophy looks through to the quality of the underlying portfolios, rather than investing in an index or a security.
“What we're trying to do is identify real estate portfolios that are generating a nice consistent stream of cash flows, which can support the distributions or the dividends and capital appreciation over time,” Julian says.
There are three key tenets to the way that Resolution Capital frame this:
- Pricing Power - Looking for high quality real estate in high barrier markets. Real estate markets where there's a degree of supply constraints, where landlords have the ability to increase rents over time
- Capital Structure - Real estate investments with strong balance sheets. Investments that can withstand inherent cyclicality and take advantage of some of those market cycles. Low leverage is an important characteristic of their investments
- Alignment - The management teams are looking over these investments on a day-to-day basis. These teams should have the requisite skill and experience in these property markets to drive the returns of the underlying investment and have strong alignment. Overall, this is looking at the corporate governance of the vehicle and the incentive structures in place.
Diversification and Market segments
As global real estate in investors, Resolution Capital principally focus on REITs and property companies around the world. Many investors in Australia would think of traditional property types - whether office, retail or logistics - but when looking globally, there's a significantly wider set of different property types available This includes residential homes and multifamily apartments, housing estates, student accommodation and healthcare related real estate such as hospitals, to self-storage, data centres, data storage and cell towers.
Overall, these are quite diverse opportunities that are very difficult for many investors to get exposure to, as individuals.
What is a REIT?
A REIT is a Real Estate Investment Trust. In civil terms, it’s a corporate structure which enables the tax efficient distribution of cash flow through to investors. It removes the REITs requirement, to a large extent, to pay tax on that income, so it can be distributed effectively through to investors. The majority of income in the REIT has to be distributed on an annual basis. There are a few different nuances to REITs around the world, however these are the key attributes.
Should you wish to discuss how your portfolio is positioned in the context of your investment objectives and market risks, please speak to your local BDO Private Wealth adviser.
Resolution Capital Global Property Securities Fund is licenced to provide general advice. The information contained is not advice, is general in nature and does not take into account your objectives, financial situation or needs. Before making a decision to invest in this fund please consider the relevant Product Disclosure Statement and Target Market Determination to determine if the product is right for you.
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