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CFS Colliers international property securities fund?

Discussion in 'Managed Funds & Index Funds' started by FrankGrimes, 5th Jan, 2007.

  1. FrankGrimes

    FrankGrimes Well-Known Member

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    Hi all

    I'm looking to add to my managed fund portfolio and I'm interested in this fund. Its relatively new and performce for the past 2 years has been excellent.

    I'm currently heavily into Australian LPT's and would like to diversify.

    Pros?
    Cons?

    Anyone in this fund at the moment?
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    It's on my short list at the moment (the wholesale version actually) - I've been watching it for a few weeks now. Not quite best performer on my list, but it's right up there among the best ... in the top 6.

    Pros - exposure to international listed property - good diversification across Asia, Europe and North America, not overweight in any particular region. Good recent performance (in line with Australian property securities returns).

    Cons - it's a pretty new fund, so there's not much history to go by. Low franking on distributions because of interational holdings. Currency risks - which include hedging risks since it hedges currency exposure.
     
  3. davecata

    davecata New Member

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    Sim, was just wondering what are the funds in your "top 6", if you don't mind me asking?
     
  4. Redwing

    Redwing Well-Known Member

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    What LPT's are you holding Frank and how have they performed if you dont mind the query?

    Haven't gotten into LPT's at all
     
  5. seaview

    seaview Well-Known Member

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    HEDGING CURRENCY

    Sim,
    Can you please explain what you mean about the extra risk from hedging for currency. I just bought into Colliers and thought that as it hedged currency the exchange risk was reduced somewhat. But I am far from an expert.

    I too am keen to hear your top 6 LPTs. I like McQuarie Property Income Fund, Australian Unity Property Securities (Growth Units) and Deutsche Global. It is too early though to see if any of them live up to their glossy annualized returns.

    Another hypothetical question from a mum-dad share investor: if market crashed (yes I know this theme is getting a bit repetitious) ....let us say about 20% or even 40%, how much less would one expect managed funds to fall eg. LPTs and more importantly, the Navra Oz funds?
    What happened to such funds in the past when the market fell so far?
    I am hoping that even if the doom-gloom stuff is true (and there is a lot of it around - even in mainstream articles now), that most managed funds will not fall so far. ? ?
    I am currently increasing our buffer and reducing LVR but one still wonders how much is enough .... Am considering buying some gold and silver too....:)

    Thanks
    Seaview
     
  6. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Hedging (in very simplified terms) involves taking a bet on whether you think the AUD will rise or fall against the currencies you are trading in. If you get it right, your hedging will improve your returns. If you get it wrong, your hedging can hurt your returns.

    Hedging is never a guaranteed thing - at times you would be better off unhedged, and other times you would be better off hedged.

    I think (I'm not an expert in currency trading), that hedging relies on you accurately assessing which way the currency will move in the future - and you may get it wrong.

    There are examples of managed funds which have had terrible years due to hedging mistakes - Platinum International was one such example, their explanation of why they performed so badly after a string of stellar years, was that they got their hedging strategy wrong.

    I'm not saying hedging is bad - and indeed it is supposed to reduce risk overall, but there is a cost in doing so.

    So you are correct in saying that it does reduce the risk "somewhat", but it still is a risk. Whether it is a greater or lesser risk than staying unhedged is a bit of a religious debate I suspect.
     
  7. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    It really depends on the fund and what it is investing in.

    While LPTs are traded on the exchange, and will tend to move with the sentiment of the market to a degree (ie will most likely drop when the market drops significantly), I think you would need to look at the fundamental reasons why the market has dropped to determine whether the LPTs will also drop.

    If the economy is down the drain, property is usually a safe-haven, but commercial property can be hit hard by a recession where there is an increase in business failure resulting in poorer returns.

    The Navra funds will follow the market down to a degree, but will be buying all the way down until they are fully invested, and during the rebound, will most likely cream the market - vastly outperforming because they bought cheap and sell to realise profits as the various stocks recover. So short term pain, but longer term very great returns. In theory at least. Steve said his best year ever was after the 1987 stock market crash. Unfortunately the funds haven't been through a real downturn yet, but in the short "corrections" we've had over the last couple of years, the funds have generally outperformed the market significantly during the rebound.

    Depends on the fund. I think the Navra funds will cope quite well - but you do need to be aware that they WILL go down ... it's on the rebound that they make their money.

    Funds like the geared share funds will be hit really hard.

    Small caps are often hit very hard during a severe downturn, as people turn to the blue chip safe-havens for refuge.

    What makes you think the market will crash ? Is it because we've had three excellent years on the markets and therefore it must crash ? What about the market P/E ratios, which are still at or below long term averages and not considered overpriced ? Is the economy faltering ? Is the resources boom over ? Are interest rates already above the long term average ?

    I'm not saying it won't crash, or that caution is not prudent ... but doom and gloom is certainly not the prevailing sentiment right now I think.

    If we were to see a "crash", I think we'd see more irrationality first.

    I suspect we are much more likely to see a subdued market with a long downward trend for a while - but only if growth stalls, but prices keep rising (especially oil, but also food as a result of the drought), forcing interest rates higher despite the low or negative growth. I'm not sure that's enough for a crash - but it would certainly have a negative pressure on the markets I think.

    But I think we've got another 12 months or so of growth yet ... so there's still hay to be made I feel.
     
  8. seaview

    seaview Well-Known Member

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    That sounds reassuring. I think the Oz economy is going great guns, all things considered. It is the US economy and falling (maybe crashing) US$ that all the pundits go on about. And it does make a lot of sense with their huge debt. We would not be immune from some ripple down effect, since we seem to follow closely the USA markets. I think if their dollar falls a lot, and US inflation increases out of control etc they will be in for a very hard time. Australia would fare much better I think. We did not even seem to blink in their last recession, but in a big one I am not so sure.

    My thinking is that buying a small amount of gold will provide a bit of a hedge, though I know it is volatile and some predict that it will go down a lot more too. (And in most crashes it seems to fall a bit initially, tho it picks up quickly in a really bad crash).

    I need something to balance our small holding of riskier geared shares, global resources and small caps, which I really don't want to sell as their growth beautifully balances out the Navra lack of growth. It is the first month that we have capitalized interest and it seems to be working: the growth in them plus high growth LPTs is keeping the LVR down.

    Anyway, it is reassuring that Steves best year was 1987. I still wonder how far his fund might fall initially in a crash. Do you think an LVR of 50% in Navra would protect against a 20% or even a 40% fall in market (putting aside effect of riskier funds on LVR) ??

    I would like to get down to 40% LVR but would prefer to wait. Though I am just not sure how long we have till a big correction. It is a bit scary that the company CEOs (USA only I hope) are selling their shares like crazy, and the last time insider selling was so high was in 1987.

    My other problem is working out how to buy gold. Have read lots of articles on it and holding the physical asset seems best, though there is no ongoing income and worst of all it will not offset my margin loan LVR> I assume CGT applies when I sell but I could deduct the interest payments on the bank loan used to purchase it??
    Other option is to buy Goldcorp shares or SelectGold managed fund. Not sure if LE will loan for these? Am still researching this. Last option is gold mining shares but this can be more risky with higher costs of miners etc. Robert Kiyosaki has solved this problem: he just bought his own gold mine and a silver mine too.

    Silver is interesting too. Apparently silver usually is about 1/16th price of gold, all through history. But now it is about 1/50th which makes it ridiculously cheap, and it is quite scarce right now. I haven't started researching the best way to buy silver yet.

    One other problem is that most of the high growth LPTs are partly invested in US real estate, (Colliers, Deutsche, McQuarie plus others I think). It is quite frustrating. If they have a big recession all those US shopping malls and industrials will not be such good investments. I guess I just have to have faith that the LPTs will sell out of them quickly.

    Well, that is my two bobs worth. (I hope my two bob will be worth as much in a year or two) :)
     
  9. FrankGrimes

    FrankGrimes Well-Known Member

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    Redwing, I have 80k in the Vanguard Index Property Securities. 50% LOC and 50% Margin Loan. Performance has been stella, 1 year performance is about 30% I think, and their fees are VERY low < 0.8%. Check out their website, its very easy to read the performance details and kudos to their webmaster. (unlike Macquarie!!!). Still a bit uncertain how it will go after such a great year, I would be interested in the current XPJ PE ratio?

    Hence this post and interest into international properties securities, which seems new compared to Australian LPTs. I was reading some countries have only just developed a framework for Listed Property (UK, Other parts of Europe). I don't really want to buy another investment property but want to expand elsewhere, so just looking at some different funds available.

    Also interested in the Macquarie Property Income Fund and some of the DBREEF Property funds. And maybe a mixed share fund, so any suggestions are welcome.

    Frank
     
  10. FrankGrimes

    FrankGrimes Well-Known Member

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    The Colliers fund is quite evenly spread across North America, Europe and Asia. Have a look at the asset spread on the PDS.

    This is one thing that grabbed my attention, other than the performance of course. Other funds have high exposure to North America.
     
  11. seaview

    seaview Well-Known Member

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    Frank,
    I would prefer not to be invested in any US real estate, even a small amount, but can't find an international fund that excludes it.
    Is your Vanguard PS fund based on OZ property only?
    Even some OZ funds seem to mix US property into their funds now.
    I would like to find some property funds that invest heavily in Europe or Asia for a bit of diversity.
     
  12. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    That's the trick with LPTs in general - many are now investing offshore and with higher internal leverage than in the past - all in the name of driving short term performance. I think there are increased risks with many of these trusts which have traditionally been seen as safe and conservative.

    I actually believe that focussing too heavily on real estate in Europe or Asia may be counter-productive to your goals. While I appreciate your reluctance to get exposed to the US markets - they still are pretty much the largest economy in the world, and I think that the "emerging market" status of Asia and much of the EU (other than the more established economies there of course) will lead to far more volatility than the US will - even if they have further recession.

    I would be interested in a UK property securities fund ... but as for Europe in general, you do need to look at the negative impact that the emerging markets from many of the smaller countries entering the EU is having on the overall economy of the region (despite the huge growth in some of those smaller countries). I think it will be a while yet before the EU sees good sustained growth - there's simply too much baggage from the very poor new countries in that region.
     
  13. FrankGrimes

    FrankGrimes Well-Known Member

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    Well Vanguard tracks the index, the index is overweight in Westfield. So yes, it does have a fair bit of US exposure through that.
     
  14. sbaker

    sbaker Member

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    Ive been invested in the Colliers Fund for about 18months now. I have been nothing but impressed with the funds performance and how it has done when the dow and global markets has been down, it has quite regularly had an increase in unit price.

    Im a big supporter of this fund as i think it's a great opportunity as it allows the fund managers to transfer the country allocation to focus on country's that may be encountering a boom. There is a property boom somewhere in the world all the time and the beauty of this fund is that it can have expose to performing markets all the time.

    Go for it i say... :)
     
  15. FrankGrimes

    FrankGrimes Well-Known Member

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    Thanks Sbaker for your input. I'm pretty sold on it now, just need to fill out the forms :)
     
  16. islandgirl

    islandgirl Well-Known Member

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    Out of curiosity, what would be the difference between Colliers and Aust Unity Properity Security Growth. There return seems to be by far higher and are ranked higher.

    I'm been investigating funds in the property sector to add to my portfolio
     
  17. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    The Colliers fund invests in property securities in other countries, whereas the Aust Unity Property Securities Growth fund invests only in Australian listed property.

    The Colliers fund is very new too - so not a long track record to judge by yet.
     
  18. Nigel Ward

    Nigel Ward Team InvestEd

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    What do the respective product disclosure statements for each fund say? Reading those documents should enable you to answer your questions about each fund.

    (Sorry not trying to be rude here, but the PDS is the critical document in understanding a fund) :)

    Cheers
    N.
     
  19. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    In my opinion, the PDS documents are often a pain to read and are sometimes best left for the final due dilligence before investing (and I strongly recommend people read the PDS before actually investing).

    Not all of us are experienced lawyers who read jargon-filled documents for bedtime reading :p :D :D

    Asking about the basics of a fund on the forum is okay by me !!
     
  20. sbaker

    sbaker Member

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    Colliers country allocation is...
    North America - 30.7%
    Asia (ex Japan) - 23.6%
    Europe (ex UK) - 21.8%
    Japan - 13.0%
    UK - 10.0%
    Emerging Markets - 0.0%

    incredible diversification :)
    and currently returning 35.27%p.a. for its first 2yrs.