please find extracts from Legg Masons's April report, with more info available @ http://www.leggmason.com.au/en/pdf/monthly_reports/LMPST_monthly.pdf
Performance
The Legg Mason Property Securities Trust outperformed its benchmark by
0.5% over the month. Portfolio performance over the past year was 8.3%
ahead of benchmark.
The outperformance this month came on the back of active stock selection
decisions. In particular, overweight positions in Valad Property Group
(+23.8%) and Charter Hall Office REIT (+5.3%), an underweight position in
Mirvac Group (-4.7%) and not holding ING Industrial Fund (-2.2%) added
the most relative value.
Valad and Charter Hall Office were two of the offshore focused A-REITs to
gain ground this month.
Valad had a win this month as its European business was confirmed as the
new investment manager of European Commercial Real Estate (formerly
Kenmore Europe). Our view for some time has been that investors had
underestimated the value and growth potential of Valad�s European
business; this type of announcement provides some vindication of our
view.
Profile
Overweight Positions Active %
Valad Property Group +4.7
Dexus Property Group +4.6
Charter Hall Office REIT +4.2
Charter Hall Retail REIT +3.8
Challenger Diversified Property Group +2.1
Outlook
A flat growth outlook and relatively stable earnings environment suggest
that A-REITs may lack catalysts for near term appreciation. However, our
view is that the medium term outlook for the sector is relatively bright as
A-REITs have reduced their risk profiles over the past year and returned to
traditional property rental streams.
We believe that A-REITs� relatively low debt profiles and recapitalised
balance sheets have positioned a number of select securities to
outperform, particularly against unlisted property as well as some of the
more highly leveraged Australian equity securities. As a result, A-REITs
should produce returns that are less correlated to the equity market than
recently experienced.
The outlook for attractive relative returns continues to be strong, while
opportunity measures remain at four times normal levels. With portfolio
performance over the past year 8.3% ahead of benchmark and a valuation
spread between the portfolio and the benchmark that remains significantly
wider than normal, we continue expect to produce above normal portfolio
returns over the medium term.
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