Australian Unity’s Property Income Fund was established over 20 years ago, and has withstood it all, from the recent COVID-19 pandemic to the 2008 Global Financial Crisis (GFC). With over 1,000 investors currently in the fund, utilised by at least 350 advisers and available to many more through most platforms, we sat down and talked with Damian Diamantopoulos, Australian Unity’s head of Research Property and the Property Income Fund, fund manager. Diamantopoulos shared his rationale about why the Property Income Fund is a smart move for investors looking at property investments.
What is the Property Income Fund (the “Fund”)?
The fund is a diversified property fund. “We invest across the property spectrum. That means we invest across listed property, unlisted property as well as directly in real estate” says Mr Diamantopoulos.
“It's all about achieving a consistent and sustainable income stream for investors by having a really diversified book of property investments at its essence. Not only do we invest in the traditional commercial property sectors of office, industrial and retail, which many investors will be familiar with, but over recent years we have been tilting towards social infrastructure property. And that sets us apart from a lot of our peers.”
Mr Diamantopoulos explains that the focus on social infrastructure property plays to the strengths of Australian Unity, which is a mutual, with “Real Wellbeing” – the company’s ethos. Australian Unity encompasses a private health insurance business and a bank. As an organisation, Australian Unity has social infrastructure at its core, as it also owns and operates aged care and retirement facilities among many other businesses.
How long has the fund existed?
The fund's been operating for over 20 years. “We’ve got history in the game. The fund’s been through a number of cycles including the GFC and COVID-19 and it's performed admiringly through both of those major events” say Mr Diamantopoulos.
“Whereas, if you cast your mind back to before the GFC, many of the diversified funds that existed then, just don't exist today. The fund has longevity within the industry, and it's been true to its label with consistent returns for over 20 years.”
How has engagement been with the fund over the COVID-19 pandemic?
Mr Diamantopoulos is proud to reflect that even during the pandemic, the engagement with the fund has continued to be strong, with net flows continuing to grow, which he believes is a strong endorsement for the Fund’s strategy.
“Our fund is unlike other diversified property funds, who utilise gearing to acquire direct properties. Other funds will find a property to purchase, borrow to buy it, and then they'll look to find investor equity later to reduce their overall gearing.
“We don't use borrowings to acquire property directly, we run a conservative strategy. This means we are not reliant on bank finance, but instead need to have the endorsement of our investors. And it's their endorsement that generates further flows in the fund which then enables us to seek out the next investment opportunity.
“So, we do things a bit in reverse, we’re effectively being rewarded for our good work and that comes through additional flows. Essentially this strategy could be viewed as an investor mandate that allows us to diversify further through additional acquisitions.”
Why should advisers consider the fund?
“If you’re looking for commercial property to add to your overall portfolio mix, our fund is a great diversified offering for investors. The fund offers daily liquidity under most market conditions and enables advisers to reposition their clients’ portfolios as required.
Additionally, advisers don't have to wait for five to seven-year liquidity windows, which may be required for other similar products. They can withdraw or rebalance more readily with our fund set-up, so [it] is really suitable for SMAs” says Mr Diamantopoulos.
“Over recent years, the fund has enjoyed an increased following from investors and advisers and that's allowed us to continue to diversify and to have that point of difference by tilting towards social infrastructure property.
“Investors have seen the way we've managed the portfolio over many years. We've done well through a number of cycles, whether it's allocating to outperforming sectors such as industrial property or hospitals, and we’ve proactively managed the right level of diversification in the portfolio. Our track record has helped garner ongoing interest from advisers and investors.”
Why should investors consider the fund, especially coming out of the pandemic?
“I think the fund answers the perennial question, which is: how one achieves a suitable level of income without a high level of risk? Investors are after income, and term deposits or simply leaving cash in the bank just hasn't been cutting the mustard.
“To put it into perspective, our current run rate, if we annualise the most recent quarterly distribution, is around a 5 per cent initial yield for investors coming in at today's unit price. So really, it's a search for reliable income. We're not trying to be too clever. We're running a conservative portfolio, not over-gearing and not taking on excessive risk. It is for these reasons that investors who wish to include property in their portfolio with a consistent income return and tightly managed risk should look at the Property Income Fund.
Considering the 20-plus year evolution, what separates the fund from other options?
Mr Diamantopoulos explains, “The evolution of the fund has been its tilting towards social infrastructure property. We’re diversifying, we're expanding our sectors away from just the pure office, industrial and retail sectors that most traditional funds invest in.
“At its heart, the fund is a one-stop shop for an investor’s property exposure, as the fund invests across both listed and private markets in the pursuit of income. When we invest in directly owned property, we're fishing in a slightly different part of the market compared to our peers. We're playing in the circa $5 million to $30 million range.
“We're not out there buying the big trophy, shiny office towers or big shopping centres, etc. We're actually playing in an area of the market which doesn't really have too much of an institutional presence – most institutional investors would classify those assets as non-core due to their smaller size and are consequently divesting in them.
“We tend to find the private investors [who] don’t spend too much time trying to actively manage these assets, essentially neglecting them. This provides us with ample runway to foster strong relationships with good quality tenants to reach mutually beneficial outcomes, by bringing an institutional focus to a part of the market that has been unkempt.”
Please visit the Australian Unity Property Income Fund, for more information.
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