NAV on 2019/08/22
|NAV on 2019/08/21
|52 week high on 2018/11/07
|52 week low on 2019/08/15
|Total Expense Ratio on 2019/03/31
|Total Expense Ratio (performance fee) on 2019/03/31
Absa Fund Managers (RF) (Pty) Ltd.
South African--Real Estate--General
FTSE/JSE Africa SA Listed Property index [J253]
Fayyaz started his financial markets career at Nedcor Investment Bank in 1998 where he worked as an equity derivatives trader. In 2000 he joined SCMB Asset Management’s Equity dealing team and following the merger of SCMB Asset Management and Liberty Asset Management to form STANLIB, he was seconded to set up a new BEE asset management joint venture between STANLIB and SIMEKA, which specialised in tracker funds. In 2003 he joined STANLIB’s fixed interest team as a Fixed Interest Dealer and Portfolio Manager. Fayyaz joined ABSA in 2007 and has been managing the listed property investments of the bank over the last 3 years in the Commercial Property Finance Private Equity division. Fayyaz moved into ABSA Asset Management in 2011 following an internal restructuring and continues to focus on listed property investments. Fayyaz has a Bachelor of Economic Science degree from the University of Witwatersrand and is a CFA charter holder.
Absa Property Equity comment - Mar 19
The Absa Property Equity fund is an active, pragmatic value fund within the property sector. The fund's remarkable historical success is in part attributed to the unconstrained nature of the portfolio which is benchmark aware but not benchmark cognizant. In practice this means that the fund can deviate significantly from the benchmark through the cycle, where opportunities are identified.
Our primary objective is to be invested in the highest quality companies for the long term. The deliberate and active way in which the fund is managed can result in periods of higher volatility relative to the benchmark, to deliver results that are driven by the robust process, and portfolio manager's conviction.
The fund's total return of -1.9% for the first quarter of 2019, with the fund delivering 3.7% over a 12-month period, which was an outperformance of both the listed property index and the median manager by 9.4% and 10.4% respectively. The SA Listed Property Index as a whole delivered a return of 1.5% for the quarter, underperforming Equities (8.0%), Bonds (3.8%) and Cash (1.7%). However, over the longer term, listed property continues to be one of the best performing asset classes returning 12.4% p.a. over the last 10 years, behind Equities (14.0%) and ahead of Bonds (8.7%) and Cash (6.6%).
Towards the end of 2018 and the beginning of 2019, rising concerns around slowing global growth were met by a more dovish tone from global central bankers, particularly the US Fed. This saw a strong recovery in the property sector early in the quarter as the 'search for yield' investment theme returned to the fore as global bond yields declined on the back of a 'lower for longer' expectation of global interest rates. However, this recovery was short lived as domestic issues came to fore, with uncertainty around the potential outcome of the General Election in early May together with Eskom implementing rolling blackouts putting further strain on already soft economic environment. The impacts of the power shortages have already been felt with economic growth expectations already being revised down for the domestic economy in 2019, with further risks to the downside.
Reported results continue to show a deterioration in conditions within the listed property sector with a higher number of companies now expecting lower than expected growth in income over the next financial year. We expect the trend of negative reversions, lower escalations and elevated vacancies to continue throughout 2019. A trend we have seen emerging during the reporting period this quarter has been management teams improving the quality of income distributed together with a focus on de-leveraging and improving the quality of their balance sheets at the expense of distribution growth.
Further impacting the sentiment towards the property sector was the Edcon recapitalisation, which would put additional pressure on what was already a benign growth outlook in 2019. While the potential for rental reductions had already become public knowledge in December 2018, the details over a practical implementation dragged into 2019 with finality only achieved towards the end of the quarter.
The fund continues to view cash as a key tactical position in the short term reducing exposure to select holdings within the fund during the quarter. This cash position provides the fund with the opportunity to take advantage of the current volatility within financial markets, where attractive pricing opportunities may arise.
The sector continues look attractive on a valuation basis, offering a high single digit forward income yield with inflation like growth over the next 12 months, which provides an attractive potential total return profile.
The continued recovery of the performance of the fund on both an absolute and relative basis since the beginning of 2018 provides investors with an example of the robustness and sustainability of our investment process, which provides us with the confidence to remain invested in attractive investment opportunities through periods of significant market volatility. We remain confident that our fund is able to withstand market shocks and is still the correct choice for long term investors.
The fund aims to offer investors medium to long-term capital and income growth through investments in the SA property market, sector listed shares and unit trusts in property.