Managed Funds LPT's (Fund management)

According to most market commentators the LPT sector is in almost terminal decline with the worst still to come
Given that people are paying 2% pa to have their funds managed, why are these managers not moving the funds into cash to at least try to preserve some capital.
Surely active management doesn't simply mean sitting on your hands watching something decline every day.
Or does that active management have to come from the client in selling their holdings in the fund?

 

well UBS had a 9% hold in centro which before the crash which it has now ceased to become a substaintial holder. CFS have pulled out alot as well. When you have a whole fund dedicated to a sector thats heading down you cant really hide. Each fund has a benchmark how much it will hold in cash, i dont think anyone can say they will hold 100% cash with out getting presure from their investors. If investors want capital preserving then they should pull out themselves, not rely upon the fund manager...

 

"Or does that active management have to come from the client in selling their holdings in the fund?"


You hit the nail on the head.

 

So what are most here recommending (I stress recommending as opposed to advising) in regards to LPT's. Hang on and weather the storm or bail out??

In my situation, I'm down about 25-30%, so at moment it's only a paper loss but if I sell..............................

My gut feeling is to hang on, as I did buy for the long term, and hopefully time will correct the current downward trend, but I'd hate to see my holdings 'evaporate' because I was too stubborn or maybe too stupid (not educated enough) to buy when I did.

What do others think?

 

There is no such thing as a paper loss. Loss is a loss......
If you are down 30% it means that your money is not working for you, so you are practically losing it.
Freezing money for some time is not a good idea because you are losing opportunity to invest somewhere else. This is what an opportunity cost is all about.
It is a better idea to take a loss and invest wisely what is left. At least you have got a chance to recoup your loss and make some gain.
Let me remind you my favourite example:
Some 6 or 7 years ago a lot of people bought Telstra around $7 or $8 per share. They are still waiting for TLS to move up, and they can wait another 7 years.
Decision is yours. It’s your money.

 

Thanks for the reply Sim.

The funds for my LPT's are borrowed BUT I don't really need the money for anything else, I can't think of anything better to invest in AND I am prepared to wait 12+ months to see a recovery. Just hope things turn around.

As I mentioned before, I'm probably too stubborn to sell and realise a loss. Don't know if that is good or bad .

 

Thanks Tropo.

Trouble is, if I did sell, I'm not too sure where else I would invest that money. Whats to say that whatever else I invested in wouldn't go the same way.

As I said in my reply to Sim, I'm prepared to wait to see a turnaround, but your Telstra example also gives me something to think about.

Decisions decisions.

 

Smartypants, I have been pondering the same questions myself.
I read the following today which makes for gloomy reading.

Business Spectator - When London sneezes...

If you can't read it, they are saying that office and commercial property in London is already down 9% and is expected to fall by 30% over the next three years. Lend Lease and Westfield are big players there evidently.
How much is already factored into the prices here is the big question.
This is where I am annoyed with Australian Unity and Macquarie.
We are paying them a tidy sum to manage our money. But all they are actually doing is holding a basket of assets that is falling by the day. There is very little, if any, active management.
Worse still, despite the exceptional circumstances the communication is non existent.
How difficult would it be for the fund manager to send out an email to explain the reasons behind the large drop.
To make things even more frustrating AU have sent me a distribution for 44 dollars,
that's great, but what about my 50,000 dollars that's gone down the plug hole!
Sim made a very good point that if you sell out at least you save the 8% margin interest.
I've made the mistake of holding on to losers before, thinking well it's down 60% it can't possibly go much lower. Well guess what? they can. Some of mine went down 99.999% during the tech wreck.
I'm going to be filling in my redemption forms over the weekend, and unless a miracle happens on Monday I'm bailing out

 

And what makes you think your smart enough to pick a sector which will perform better than the LPT sector?

I would reson that most of the negativity is already factored into LPT's, so getting out now, is of no use.. however the XAO is still high, and hasn't suffered much of a down trend,, who is to say this index will now fall to come back in line with the rest of the market? The last few days have been a perfect example.. falling index when the US was up, so even positive US lead wasn't enough to raise the index..

You would hate to exit a already depressed index, and move it into one which is yet to fall.. now what would be a silly move!

 

So what happens if on Tuesday Centro makes a positive announcement, and the whole sector jumps 15%? A bit late to try to get back in dont you think?

If your a trader, you might buy sell and re-buy.. if your a buy and hold, the current situation should alter your orginal long term time frame. (which should have been 5-7 years)

 

http://www.ubs.com/2/e/auz_library/adhoc_correspondence/PSFComment_2112007.pdf

most of my funds do send me monthly updates. You will find most if not all funds should at least publish a quaterly update. If you dont subscribe to it, or log onto the website to read it, don't blame the manager for not putting in in frount of your nose.

Why does this suprise you? I said many times about this fund how I would not invest into it. You get high returns from it, you should expect the possibility of large drops as well. Take the good with the bad.. if you can't accept large flucutations in value, been up or down, dont invest into such a fund.

Let hope Tuesday Centro doesn't come out with a positive announcement, and you miss out on a 10% gain in one day.

The tech wreck is completely different to the LPT problems. Tech companies were not making any money.. LPTs own sound commercial properties which collect rent weekly.

 

well all I can say that if you can't accept this volatility, then you should not be in the market.

Its Time in the Market, not Timing.. Trying to time the market is a dangerous thing to do, as its impossible to do.

If your not confortable with your money going backwards, then fixed interest is where you should be.. not in shares or LPT's.

Warren Buffet buys, but never sells..

 

I subscribe to and read everything I can. However an update dated Sept 07 such as is posted on their website at the moment is of little use to me. The communication of AU is diabolical and
I'm not the first on this board to have noticed it.