What top property fund managers have been buying and selling

Absa Property Equity Fund, Plexus Wealth BCI Property Fund, Sesfikile BCI Property Fund.

This article was first published in the latest issue of the Moneyweb Investor. To read the magazine click here.

As an asset class, South African listed property has been an outstanding performer for the last decade. During this time not only have investors enjoyed exceptional returns, but the depth and liquidity of the sector on the JSE has also improved significantly.

For a long time, fund mangers running property funds had very few ways to generate significant benchmark beating returns because they had only a limited selection of counters and many of them were very illiquid. Generally, there was therefore little to differentiate most of the top performers.

However, that has changed as more counters have listed, and trading volumes have increased. Fund managers therefore now have much broader scope to build portfolios that can look significantly different to the market index.

Over the last three years, the top performing funds in this sector have been the Absa Property Equity Fund, Plexus Wealth BCI Property Fund and Sesfikile BCI Property Fund. Having a look at how they are constructing their portfolios gives some idea as to how they have been extracting added value from this sector. 

The tables below show which counters these managers have bought into, and which they sold out of over the 12 months to the end of March 2016. The share must have had a weighting of more than 1% to be considered. The tables also show any notable and substantial changes to positions within the funds.

The final table shows their top five holdings at the end of March 2016.

 

Absa Property Equity Fund

In

Out

Rockcastle

Dipula B

Redefine

Texton

Delta

 

Investec Australia

 

Capital & Counties

 

Up

Down

Resilient

Emira

Fortress B

 

Hyprop

 

Source: Morningstar

 

One of the shifts that Absa has made over the past year is to increase its exposure to companies with international assets. Although New Europe Property Investments (Nepi) was already a sizeable holding in the fund, it bought into three more counters with a foreign focus – Rockcastle, Investec Australia and Capital & Counties.

Interestingly, the fund also bought into Redefine. For some time the fund held neither of the JSE’s two largest property stocks – Growthpoint and Redefine – however that has now changed. As Redefine’s share price has effectively remained flat for three years, the managers may be seeing some value there now. 

They have also increased their exposure to two of the bourse’s other larger property counters – Resilient and Hyprop – while selling down some holdings in smaller players Dipula, Texton and Emira.

 

Plexus Wealth BCI Property Fund

In

Out

Schroder European REIT

Ascension

Safari

 

Indluplace

 

Up

Down

Nepi

Rockcastle

Fortress B

Tower

Source: Morningstar

 

The holdings in the Plexus fund were very stable over this 12-month period, with no really substantial changes taking place. Those stocks that came in and the one that dropped out were relatively small in relation to the overall portfolio.

The fund did however seek to gain further international exposure through increasing its holding in Nepi and buying into the recently listed Schroder. Although it did reduce the weighting given to Rockcastle, the counter is still over 7% of the portfolio.

An interesting addition to the portfolio is the high-yielding Safari, which has exposure to retail properties in areas like Atteridgeville, Mamelodi and Sebokeng. The counter has failed to gain much traction since listing in April 2014. The share listed at R8.50 and has since fallen to levels around R7.00. 

 

Sesfekile BCI Property Fund

In

Out

Intu

Acucap

Up

Down

Nepi

Growthpoint

Fortress B

Redefine

Fortress A

Rockcastle

Resilient

Octodec

Pivotal

 

Source: Morningstar

 

The Sesfekile portfolio is the most traditional of the three funds, with Redefine being its largest holding and Growthpoint in its top three. However, it has started to differentiate itself more over the past 12 months, most notably by reducing the weighting it gives to both of these larger Reits and significantly upping its exposure to Fortress.

This is significant as one thing that all three funds have had in common is that they have given a large weighting to Fortress’s B class shares. The counter has delivered outstanding growth in the past three years, with the price rising from around R8.45 per share in May 2013 to its current levels around R37.50 per share.

Sesfekile has also looked offshore through buying into Intu, although it did reduce the weighting it gives to Rockcastle. It also increased its exposure to Pivotal which recently announced a deal that will see it diversify into Eastern Europe.

The table below shows the top five holdings in all three of these funds at the end of March.

 

Fund’s top five holdings at 31 March 2016

Absa Property Equity

Plexus Wealth BCI Property

Sesfekile BCI Property

Resilient

Nepi

Redefine

Fortress B

Fortress B

Nepi

SA Corporate

Redefine

Growthpoint

Vukile

Resilient

Hyprop

Nepi

Rockcastle

Fortress B

 

 

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