A group of financial advisers have seeded a new Pathfinder Asset Management global property fund launched this week.
According to director, John Berry, the advisers have committed substantial support to the Pathfinder Global Property Fund with “good growth” in the product likely over the next six months at least.
Berry said the new fund, Pathfinder’s fourth, is targeting yield-focused investors looking for a more diversified take on property.
He said New Zealand investors tend to be overweight local property – direct and listed – with little exposure to the much more diverse global market.
“Our view is that investors should be looking outside NZ for listed property,” Berry said. “At the moment valuations in the local [listed property] are high, it’s a narrow market with little diversification in sectors.”
He said the Pathfinder fund would invest in between 50-100 global listed property stocks and trusts (from a total universe of about 300) with approximately 80 securities – including four NZ-based listed property companies – in the launch portfolio.
“In the initial portfolio 90 per cent of the investments will be Real Estate Investment Trusts (REITs) and 10 per cent will have a company structure,” Berry said. “We hold the REITs/companies directly, which offers investors the most cost efficient access.”
He said while underlying yields varied across the regions and sectors the fund will invest in, in combination with Pathfinder’s hedging overlay – expected to typically sit in the upper end of the 50-100 per cent range – income should be on par with a pure NZ listed property exposure.
“The yield on a portfolio of offshore property stocks plus the yield uplift through currency hedging delivers a similar overall yield to a portfolio of NZ property stocks (but with better diversification and valuation metrics),” Berry said.
The Pathfinder fund would also focus on companies and REITs whose primary business was from owning and renting properties, rather than real estate service firms.
“There will be some element of property development,” he said.
Pathfinder’s current property picks include US retail on office space “which are each trading at around a 10% discount to NAV [net asset value]”.
“We see Japan as very expensive with limited upside and other parts of Asia (like Hong Kong and Singapore) as good value. HK is trading at a discount of around 30 per cent to NAV,” Berry said. “We also see value in European property, particularly as the Eurozone economy slowly recovers.”
The Pathfinder product is structured as a portfolio investment entity (PIE) with a 0.79 per cent base fee and a further 0.21 per cent trustee and admin expense. Public Trust is trustee while MMC provides fund administration.
While the fund is aimed at yield investors, Berry said it will not pay distributions with income accruing in the unit price.
He said although “some investors would prefer distributions”, it was more cost-effective for the fund not to.
The Auckland-based boutique manager currently has about $105 million under management spread across three funds covering, global equity, commodities and a water theme.
Pathfinder recently commissioned Nelson-based company JM Consulting to review its global equity fund, citing a dearth of local research options servicing the boutique market.