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Don’t overlook
listed property for your portfolio
Over the past 15 years, listed property has quietly outperformed other asset classes – at end-October 2017, the Listed Property Index had returned 21.6 annually compared to the 16.2% of the All Share Index, 9% of the All Bond Index and 7.9% of the Money Market Index. Despite this, listed property hasn’t received much attention until recently, and only a few specialist funds have opted to focus on valuing the asset class correctly. What are the benefits of including listed property in your investment portfolio? We believe that as an asset class, it will give investors exposure to real estate-related returns.
Historically, an investment in direct real estate has been attractive for the following reasons:
On the whole, investment in direct property can be highly profitable if done correctly. However, there are also a few drawbacks:
So how can investors be exposed to real estate-related returns without the drawbacks of holding a direct investment? The answer is to invest in listed property, which enables participation in real estate returns ‘indirectly’.
There are two main types of listed equity property investments:
The advantages of investing in listed property include:
Qualifying REITs on the stock exchange are also exempt from corporate tax, as a REIT distribution is considered to be a return of capital. However, investors won’t escape tax – they’ll be taxed on their distributions at their respective income levels.
REITs provide a relatively predictable earnings stream as their income generation is fixed by contracts between the landlord and tenants. The predictability of earnings and the high yield offered by REITs – they’re required to pay out 75% of distributable earnings – are attractive to investors looking for consistent income in their portfolios.
Another appealing tax attribute of REITs is that they’re not subject to capital gains tax (CGT) on the disposal or transfer of assts. This creates flexibility for the fund to manoeuvre the portfolio to extract value without triggering CGT.
The market for listed property has grown and allowed investors to overcome a few of the issues associated with direct real estate investment, while giving them access to the same set of returns. Increased liquidity, access to a diversified property portfolio and specialist management team, and exposure to the same profile of real estate inflation-hedged returns makes listed property an attractive addition to an investment portfolio.
Sanlam Private Wealth manages a comprehensive range of multi-asset (balanced) and equity portfolios across different risk categories.
Our team of world-class professionals can design a personalised offshore investment strategy to help diversify your portfolio.
Our customised Shariah portfolios combine our investment expertise with the wisdom of an independent Shariah board comprising senior Ulama.
We collaborate with third-party providers to offer collective investments, private equity, hedge funds and structured products.
We provide daily reporting of trades, monthly portfolio evaluations and annual tax reports to clients.
Riaan Gerber has spent 13 years in Investment Management.
Have a question for Riaan?
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Sanlam Private Wealth (Pty) Ltd, registration number 2000/023234/07, is a licensed Financial Services Provider (FSP 37473), a registered Credit Provider (NCRCP1867) and a member of the Johannesburg Stock Exchange (‘SPW’).
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All reasonable steps have been taken to ensure that the information on this website is accurate. The information does not constitute financial advice as contemplated in terms of FAIS. Professional financial advice should always be sought before making an investment decision.
INVESTMENT PORTFOLIOS
Participation in Sanlam Private Wealth Portfolios is a medium to long-term investment. The value of portfolios is subject to fluctuation and past performance is not a guide to future performance. Calculations are based on a lump sum investment with gross income reinvested on the ex-dividend date. The net of fee calculation assumes a 1.15% annual management charge and total trading costs of 1% (both inclusive of VAT) on the actual portfolio turnover. Actual investment performance will differ based on the fees applicable, the actual investment date and the date of reinvestment of income. A schedule of fees and maximum commissions is available upon request.
COLLECTIVE INVESTMENT SCHEMES
The Sanlam Group is a full member of the Association for Savings and Investment SA. Collective investment schemes are generally medium to long-term investments. Past performance is not a guide to future performance, and the value of investments / units / unit trusts may go down as well as up. A schedule of fees and charges and maximum commissions is available on request from the manager, Sanlam Collective Investments (RF) Pty Ltd, a registered and approved manager in collective investment schemes in securities (‘Manager’).
Collective investments are traded at ruling prices and can engage in borrowing and scrip lending. The manager does not provide any guarantee either with respect to the capital or the return of a portfolio. Collective investments are calculated on a net asset value basis, which is the total market value of all assets in a portfolio including any income accruals and less any deductible expenses such as audit fees, brokerage and service fees. Actual investment performance of a portfolio and an investor will differ depending on the initial fees applicable, the actual investment date, date of reinvestment of income and dividend withholding tax. Forward pricing is used.
The performance of portfolios depend on the underlying assets and variable market factors. Performance is based on NAV to NAV calculations with income reinvestments done on the ex-dividend date. Portfolios may invest in other unit trusts which levy their own fees and may result is a higher fee structure for Sanlam Private Wealth’s portfolios.
All portfolio options presented are approved collective investment schemes in terms of Collective Investment Schemes Control Act, No. 45 of 2002. Funds may from time to time invest in foreign countries and may have risks regarding liquidity, the repatriation of funds, political and macroeconomic situations, foreign exchange, tax, settlement, and the availability of information. The manager may close any portfolio to new investors in order to ensure efficient management according to applicable mandates.
The management of portfolios may be outsourced to financial services providers authorised in terms of FAIS.
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