Managed Funds LPT's (Fund management)

Yes, and this is the reason I was attracted to this sector.
Rising property prices, rising rents, rising population.
OK, so some of these companies may have to refinance their loans to a slightly higher rate, but they still hold valuable assets and they're still getting their rents.
So how does this equate to a drop in unit price from 270 to 150 in the space of four months?
For a growth fund with a Morningstar rating of 3, I think people that invested are at least entitled to an explanation.
You don't seem to think that there is anything out of the ordinary in such a decline, so perhaps you'd be kind enough to explain why you think it has happened?
I guess the easy answer is going to simply be that it was overvalued in the first place!

 

Sim, looks like you've just answered this question above. Thanks.
Wish I'd read that a year ago.
Going for growth rather than income. Overleveraged. Oh dear I think you've described my current predicament as well!

 

I'm thinking the problem with LPT funds is their scope to invest is only limited to LPT's. Hence they need to invest in that sector, regardless if they think its good value or not.

Investing into a broard fund which has a wider scope to invest allows them to invest into what they consider to be good value.

As sim mentioned, LPT's have had high gearing, and hence now its coming all unstuck. A broad managed fund may have choosen not to invest in LPT's but somewhere else where they decided is better value.

I'm now considering if I should review my fund selection to funds which have a larger investment scope to pickup quality assets regardless which sector they are in.

Sad really as LPT has been a winner with 20PA+ over the last 3 years since I'm in it, and now the market takes away everything I earned in that 3 years.

 

Trading halt signals end is near | The Australian

not looking good at all..

should Centro collapse, it will take down most of our major banks..

watchout Australia!! not just LPT's.

 

If your overall objectives and risk/reward profile don't change, then there's no need to re-assess really. Your objectives and risk/reward profile determine your asset allocation which is fixed. Periodically all you have to do is re-balance your portfolio to reflect the original asset allocation. The most effective way to do this is by adding cash funds to under-weight assets/funds in your portfolio, as opposed to selling over-weight funds and triggering CGT.

 

The core/satellite approach. Ie. Most of your funds in index funds/ETF's as your core portfolio and a smaller amount in direct shares etc...To me (with my biases), the most logical and sensible approach to investing.

 

As I said at the start of this thread, if you pay a fund manager to manage a fund, then they should also be managing risk. If Sim can work out that prospects for the LPT sector were not looking good a year go, then the fund manager should also be able to.
If this means that they need to reduce their leveraging, then they should do so.
If reducing risk means liquidating some of their holdings and moving to cash, then this is what they should be doing.
The XPJ is down some 20% according to my calculations while my LPT funds are down over 40%. Another 20% drop in the index and I could be down by 80%. This can only mean poor management. According to Morningstar mine are supposed to be highly rated well managed funds!

 

outlook for 2008 is a correction first followed by one more bull run.. so prehaps we need not panic. There is also a 100 year all ords chart which shows were are in the normal upper range of the channel. Even though the 20 year chart showed we are off the scale.. this is some comfort!

{edit cant seem to attach the report}

 

Hi crc

A correction first..........haven't we already had that/having it?

Did the report say how much of a correction?

And in regards to the "one more bull run", what about AFTER that? Another correction or more stable market/s.

Thanx for the info.

 

This report was written in DEC, so they said they would expect a correction to take place. Which seems to be talking place now. Followed by a run before a 'crash' taking place at 2010. The report is the Huntleys.

Basically they said we are still in a bull market, which hasn't ended yet and wont end till 2010 give or take.

We are to expect a few months of volatility before the financial markets clean up the sub-prime mess before we can move foward.

I would attach it for your read, but it seems I cant attach 1.6MB PDF's as they are to big!

 

one more thing they said is to use these dips to top up positions.

 

Well this is now the second correction in the past four months.
In the case of LPT's, mine anyway, have dropped over 40%, more of a crash than a correction.
I've really given up listening to the so called experts. They know as much about the future as you or I, but get paid considerably more for expressing their views.
This is the problem with investing. One can spend hours, weeks, years researching something, but if what your'e being told is just a pack of lies, then it's a complete waste of time.

 

“I've really given up listening to the so called experts.
They know as much about the future as you or I, but get paid considerably more for expressing their views.”



Next time follow a chart...not “experts” or “gurus”. Chart will tell you almost all you need to know.
PS – If you lose 40% then to regain your original equity you need to make a approx. 67% return on the remaining funds available.

 

Lorrimer which LPT funds do you hold
How much of your total portfolio is in LPT

Why did you choose the specific funds in the first place
When did u buy them and why exactly
Use it as a learning experience

Also you mentioned morningstar ratings
Go and do a google on - "morningstar kiss of death"
and you will find some interesting articles

Why did you think managment could do better
Yes the index is down 20% in 3-4 months

If it is a lot you need to go back and analyse your total portfolio and risk profile

 

I am a firm believer in the value of charting. I did start using charting software when I tried day trading on the Nasdaq about 10 years ago.
However I have now forgotten most of what I learnt back then.
I arranged my current portfolio to set and forget and to hopefully provide an income for the next twenty years. As I intended not having to trade any of the funds in the near term, I didn't see the value in studying charts.
Just out of interest did your charts tell you what was about to happen with the LPT sector?
I should imagine that no chart could predict the sub prime crisis.

 

Charts do NOT predict. Charts are telling you what is happening at the very moment.
But, not to worry. Nobody knows what will happen in the future, so one day you may well be above sea level again.

 

I don't know if you wanted me to answer, but here goes anyway as it may be of benefit to another forum reader.

My LPT funds are Macquarie Property Income Fund and Australian Unity Prop Securities Growth. Bought about a year ago. Chosen because of their track record and because I wanted a higher Property exposure in my entire portfolio whilst avoiding the costs involved with purchasing and holding residential property. Originally these two funds accounted for 25% of my portfolio's value. However they are now only worth about 13% of the Portfolio.
65% of the portfolio is in Navra and BT imputation to provide income, which have performed well.
The remainder I invested for growth (to help keep the LVR in check) in Challenger China and Hunter Hall Value Growth. These have also performed well.
Originally my LVR was 46% but with capitalised interest and the big drop in the LPT's the LVR now stands at over 60%.
So in summary the portion of the portfolio that I was expecting to give steady growth over the longterm (property) is the one that has let me down.
Having read your thread on changing your portfolio to index funds, when the dust settles, I'm going to be looking into doing the same. I've been a fan of ETF's for many years after having read that 90% of fund managers fail to beat the index.
There was very little talk of ETF's or index funds when I was about to set up my portfolio, in fact I don't think Suncorp even included them on their list.
Just as a matter of interest, how have your DFA funds held up? Any regrets?

 

my overall share portfolio is down 12% in 3 months
no regrets - only that I should have listened to my advisor when entering the market - to enter in stages rather than one big lump sum
In retrospect I entered at the worst possible time in the last year
But my long term outlook and risk profile means that I do nothing. No selling. Im confident of my underlying assets.
I will look to buy more soon to dollar cost average

Its too soon to analyse DFA performance in my portfolio and whether it outperformed the index

 

Time to invest

I believe, for the following reasons, from now, over the next few months are an ideal time to add to LPT holdings. Why:

1.) A yield play. I can get 9 - 11% on many LPTs now, and 8.5%+ on managed funds (e.g. APN Property for Income 2, etc..).

2.) The underlying assets have not changed. Rental growth, in Australia at least, will occur for underlying offfices, retail, industrial over the coming years (esp due to high inflation).

3.) The issue (which has spooked the market) is with leverage. Some LPTs have let their gearing levels creep up. On a cashflow basis they are not stressed. They can make payments, and haev increasing profits. The issue comes when it is time to roll debt.

4.) Centro was caught out (stupidly). Many LPTs have issued statements of when portions of their debt need to be rolled. Most are in 2009 onwards. Plenty of time to organise finance.

5.) With many of these problematic financings being in the US - the Fed Reserve looking to cut rates by 0.5% (or 0.25%) will offset any increased borrowing costs by these entities.

6.) 6 months ago people were falling overthemselves to buy LPTs for 6 - 7 % yield. FOr the most part nothing has changed. Why not buy now for 9 - 11% ? Once this credit crunch blows over, people will rush in to buy on those yields.

7.) For people who say that "what if they cant get refinancing - and lots go broke". How are LPTs (with internal gearing) different to the balance sheets of many regular corporates who are 20, 30, 40, 50% geared? If LPTs start getting refinancings refused on mass, so will many many corporates. The share market doesnt reflect this, and in any event the govt would act to increase liquidity if this were to occur.

For those who say "sell now" for current holdings - why? If you are still holding now - and its a good time to buy - why would you swap out of an asset which will pay such high yields and has solid medium term growth potential?

Of course the next few weeks may see some more drops before it turns around. Nobody can call the bottom. But the value is great now.