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Australian Unity Property Securities Growth

Discussion in 'Managed Funds & Index Funds' started by lorrimer, 16th Jul, 2007.

  1. lorrimer

    lorrimer Well-Known Member

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    Hi,
    I just made an enquiry to AU, asking why the unit price has suddenly dropped dramatically from 2.70 to 2.30 when only a tiny distribution was paid out.
    I was told that due to a new ruling, capital gains also now has to be paid out.
    Which means a fairly large sum hitting the bank account on which I will have to pay tax.
    Does anyone know if this ruling of having to pay out capital gains applies to all funds, or is it unique to this fund only.
    Thanks
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I wasn't aware that there was previously a choice in not paying out realised capital gains at the end of financial year ?
     
  3. DaveA

    DaveA Well-Known Member

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    Unity is just scaring me lately, not only do they pro rata there distributions, they have had very poor growth (ive got negative 10%) in the past 6 months, despite this as per 30 june, there yearly return was around 70%... must of been a cracking july through to december for the fund...

    i am sure ill be saying goodbye to this fund very soon...
     
  4. crc_error

    crc_error The Rule of 72

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    This fund was one of these very high return funds, which I call one hit wonders!

    I avoid these funds, and stick to funds which show more moderate returns which I believe are sustainable. Research shows last years winner usually is next years looser.

    I think that fund was up like 70%PA at one stage. This would indicate to me that it could drop by that amount in 12 months as well.

    If your not comfortable with such volatility, then your in the wrong fund.

    The whole LPT index has dropped, so its not just AU. But I would expect AU to drop more due to its high volatility.

    This is why its important not to chase past returns in funds!
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I disagree with this generalisation. My research shows that there are plenty of funds out there which perform consistently well (and consistently better than others) over an extended period. I'm not necessarily talking about the highest performing fund in any one year, but just because a fund is up there, doesn't mean that it won't be again in the future. However, most markets are cyclical - and you do need to take this into account.

    I don't think there is necessarily any direct correlation between this year's positive performance and next year's possible negative performance. A fund that did +5% this year could just as well drop -70% next year too.

    In general, I find that generalisations are dangerous to your wealth and your health :D
     
  6. crc_error

    crc_error The Rule of 72

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    I'm not talking about consistent results, ie 20% PA over 5 year, I'm talking about a fund which one year returns 77% like the recent macquarie small companies fund. The one year result skews the 5-7 year averages to give a false impression that the fund consistently has returned good results, when really it was a one hit wonder. Simply choosing a fund because of its last 12 months return is bad for your wealth health!

    No, I didn't say that, I said that a fund which one year goes up 70% could drop by 70% just as easily as it went up. Whereas a fund which goes up more modestly is unlikely to show a 70% drop. You need to expect the worst scenario when making a investment, and if your not comfortable with that scenario, then don't enter the investment. Markets don't just go up, they also go down, and usually via the elevator not the stair case.

    I agree, if a fund shows CONSISTENT YEAR IN AND YEAR OUT good returns, then that is the type of fund I like. Don't get fooled by a fund which returns 70% in one year and skews the 5 year average to give a false impression of consistent returns.
     
  7. lorrimer

    lorrimer Well-Known Member

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    Having read the PDS again I did notice a small line that states "distributions include income and net realised gains".
    I wish I had paid more attention to this before, although it isn't made clear under the section relating to distributions.
    My intention in including this 'growth fund' was to use the growth in the unit price to lower my LVR over time.
    However if all the growth in the unit price is going to be extracted and paid out at the end of each financial year, all I have managed to do is increase my LVR and tax bill.
    Am I missing something?
     
  8. Simon

    Simon Well-Known Member

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    Maybe you need to buy NAB or BHP or WOW or the like rather than a managed fund?? Blue chip shares which can retain earnings and show a record of growth and dividend growth as well are terrific growth vehicles.

    I named those shares off the top of my head and if you buy based on that then you are the biggest fool in the market (see the bigger fool theory to understand what I mean Bigger fool theory - Wikipedia, the free encyclopedia) :D :D

    Cheers
     
  9. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    So how about a fund which returns 50 - 70% every year ?

    Yes, but by the same argument, couldn't a fund which has consistently returned 20%pa conceivably drop by 70% in one year ?

    Have a look at the actual past performances of some of the more volatile funds. Yes, one year they may be up 70%, but they are rarely down by 70% the following year, and the year after they are back up again.

    Here are the actual financial year performances for the CFS Wholesale Geared Share Fund - FSF0043AU (assumes distributions reinvested and doesn't take tax into account):

    1997/98: 33.16%
    1998/99: 42.23%
    1999/00: 22.10%
    2000/01: 26.88%
    2001/02: -8.08%
    2002/03: -14.23%
    2003/04: 40.63%
    2004/05: 64.12%
    2005/06: 56.68%
    2006/07: 42.38%

    There is quite a lot of volatility in this fund (the figures above don't show the swings during the year) - but over time it performs very very well. If you invested $10K at inception in 1997, it would be now worth close to $125K.

    Yes, but it is also unlikely to show higher average returns over time.

    No, you need to be PREPARED for the worst - if you expect the worst, you will usually find it. If you look for the best but have careful plans for dealing with things when it doesn't do what you need it to - I think you can do better overall.

    Yes, it all comes down to risk profiles - which is what I think you are trying to say. Beware high volatility ... invest with care - but I'm saying don't NOT invest - just make sure you go in fully understanding the possible behaviour of your investment and have a plan for dealing with things if they go bad.

    For what it's worth - I agree totally with this statement (which I know was your point all along). Platinum Japan is one such fund:

    1998/99: 84.27%
    1999/00: 84.13%
    2000/01: -12.67%
    2001/02: 1.38%
    2002/03: -9.18%
    2003/04: 43.66%
    2004/05: 3.53%
    2005/06: 31.35%
    2006/07: -10.02%

    Again, these annual figures don't show the intra-year volatility from this fund ... it is huge. Those first two years pretty much guaranteed a strong inflow of funds over the next 5 - 7 years from people who only considered 5 or 7 year averages. If you invest in this fund, you'd better like rollercoasters !!
     
  10. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Yes I think you are missing one small bit.

    What you are seeing is distribution of realised capital gains. This is where the fund has sold off a share to either lock in profits or to redistribute capital. These net gains must be paid out - they will be paid as capital gains (and hence subject to CGT), but you will potentially receive a 50% discount as a personal (or trust) investor ... which makes it much more tax effective than regular income.

    However, these realised capital gains won't be all of the gains - there should be a lot of unrealised gains still held in the fund at the end of the year - and that is where your growth comes from. You can work out how much this is by looking at the change in post-distribution unit price over the year.

    Some examples:

    NavraInvest W/S AUS 2006/07: 1.0947 - 1.1183 (approx post distribution prices) = 2.2% increase or retained growth from a total annual return of 20.6%. This is an income generating fund, so the majority of profits are paid out as distributions.

    CFS W/S Geared Share Fund 2006/07: 5.7281 - 7.9804 = 39.3% increase or retained growth from a total annual return of 42.4%. This is a growth fund, so there is relatively little paid out in distributions.

    CFS W/S Small Companies Core Fund 2006/07: 1.5226 - 1.8810 = 23.5% increase or retained growth from a total annual return of 49.6%. This fund returned quite a high distribution as you can see by the difference between retained growth and total return, but most of it was realised capital gains as opposed to income like the Navra fund.
     
  11. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    By the way ... I'm talking from experience here - I invested in the Platinum Japan fund for exactly the (wrong) reasons listed in my post above ... and it was only when I realised what the fund was actually doing day to day that I started looking for more detail and understanding the funds better.

    I bought in progressively over 6 months or so during early 2006, and then sold out near the end of 2006 when I began to understand my mistake.

    Since then I have developed a fairly sophisticated system for analysing funds to avoid similar problems in the future.

    At one point I had $120K in the Platinum Japan fund, and lost just over $9K by the time I got out.

    If I still held those units today (7 months after I sold out) they would be worth only $95K ... more than 21% less than what I paid for them :eek:
     
  12. crc_error

    crc_error The Rule of 72

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    Sim, yes I agree with you re colonial first state geared share fund.

    You have broken down the ACTUAL returns for the years, not the averages. And you can see that this fund has been pretty consistent with its returns, hence its one of my favorite funds (I have 100% of my super in it for the last 7 years)

    And my point is the one like you highlighted with the Japan fund.. exactly my point how a couple massive years are hide the bad years..

    In the end, what I have done is looked for 6 different funds which have shown consistent good returns over 5 years plus. I look at the ACTUAL returns and pick a top performing fund that way. These six funds are what I consider the best funds in each asset class.
     
  13. coopranos

    coopranos Well-Known Member

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    As has been said, that seems a bit of a generalization, you cant just say that the fund is a one hit wonder when all the property securities funds that I have seen have all copped a hit.

    Got some examples of what you are claiming?

    Why would you make an investment if you EXPECT the worst? Surely the job of the investor is to do the research and only invest in something you expect the best out of? If you expect to lose money, why bother investing?
     
  14. crc_error

    crc_error The Rule of 72

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    Because you can never guarantee a return on a investment, and if your not able to take a potential maximum loss, then you should not invest. Stick to fixed interest. General rule is the higher the return, the higher the risk.

    Have a look at the Platinum Japan fund. There were some years which returned I think it was 90% PA, followed by some very disappointing results for the following 5 years.


    No one invests to make a loss, but the reality is that regardless of how much research you do, you can't guarantee a return. If you think a return is guaranteed, then you haven't matured as a investor. We have lived through good times over the last decade, and this has essentially given many people a false sense of security which don't carry the battle scares. If you expect a large return, along with that you need to accept a higher risk. If you expect a lower return, then the risk and volatility is lower.
     
  15. coopranos

    coopranos Well-Known Member

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    Cant see the relationship to my point - you are claiming a particular fund is a "one hit wonder", although it is the whole sector has copped a hit. Is the whole sector therefore a "one hit wonder"?


    2 years of ~90%, 3 years flat, 1 year 45%, 1 year flat, 1 year 33%, average of ~29% over 8 years. Hardly a "one hit wonder", and nowhere near the "+70% one year then lose 70% the next". Considering their PDS suggests a minimum 5 year time frame, that actually seems very reasonable to me. To suggest a fund manager is a one hit wonder after a 29% average return over a long period with a maximum annual drawdown of 10% is a bit rough and a little naive.


    Your original comment was to expect to make a loss. I definitely agree that in any investment you must take responsiblity for the risk involved, however that is why you put risk management and money management techniques in place.
     
  16. Wazza

    Wazza New Member

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    I'm fairly new to Aus unity (4 months). In the initial letter it said I would be advised each time I made a deposit etc. I haven't received anything yet (invest each month), nor received any end of year summary. Is this normal?- Yes I know I could phone, but they are not available on Sundays :)
     
  17. tony

    tony Well-Known Member

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    Hi

    I'm like wazza, a new investor to Aus Property Securities Growth, and in that regard, I'm currently under water in my $100k investment.

    I still can't follow why the share price fell dramatically in June (apart from usual market volatility) or why there has been no explanation either posted on the AU website, or sent out to shareholders (particularly if, as a previous forumee mentioned, the price drop could be "explained" as being the result of a recent tax ruling).

    One would think that AU, conscious that investors just might be nervous following several recent property collapses, would inform its shareholders that the dramatic drop in price was the consequence of a change in tax policy.

    Maybe not - some firms never really cotton on to the adage "communication, communication, communication".

    Tony
     
  18. tony

    tony Well-Known Member

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    Hi

    Incidentally, apropos the reference to Platinum International, I too have shares in the fund, and have been disappointed in its operformance for the past few years.

    I note in the June 2007 newsletter that Kerr admits that they were wrong in their assessment of a weakness in the markets, and as a consequence are now unwinding some of their shorts.

    I suspect that the reputation of Plat Int is based on the fact that in 2000-2002 they were short whereas everyone else got it wrong (including Colonial Geared).

    A look at the returns for Plat Int the past few years show a pretty average performance (but like others, I guess I will hang-in in the hope that their performance will improve).

    Tony
     
  19. Tropo

    Tropo Well-Known Member

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    "(but like others, I guess I will hang-in in the hope that their performance will improve)."

    I would sell it long time ago.
    Time = Money !! ;)
     
  20. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Shareholders ? ... or unit holders ? Two very different groups of people - and they have very different reporting obligations to each.

    As a unit holder, I'm afraid that the only time they are obliged to inform you about anything is if they change the PDS. You should expect regular market updates and analysis from them - but this is not mandatory, and not everyone does it.

    I think you'll find that most property securities funds are down a lot at the moment - the XPJ index is down nearly 10% from highs earlier this year, and most Australian property securities funds would invest in shares contained within the XPJ.