Within the portfolio, we have the purchase of the VanEck Vectors Australian Property ETF which is listed on the ASX and trades under the code “MVA”. MVA is designed to capture the performance of the broader Australian property sector with exposure to the industrial, office, retail and residential segments.
MVA incorporates a rules-based approach to holding a diversified portfolio based on market capitalisation with a maximum weight of 10% for any one position. This enhances the liquidity of the portfolio reducing exposure the larger cap names while ensuring proper diversification is maintained.
The attraction of the VanEck Vectors Australian Property ETF is that it:
- provides a differentiated index exposure to the Australian listed property sector, reducing the concentration risk of the large-cap names that dominate the sector.
- under the current backdrop of “lower for longer” in terms of bond yields – historically high and regular divided provides a stable income above the rate received from fixed income and cash.
- valuation support – the AREIT sector not only trades at a material discount to local industrial companies also impacted by the recession, but where property concerns are most acute, investors appear to be pricing in very poor outcomes.
- low on-going costs offer good value for money for a liquid investment to the sector.
In summary, the extended outlook for the historically low rate environment will see investors again focus on higher-yielding defensive assets as income alternatives to cash and bonds as we adapt to life post-COVID. And REITs, with strong balance sheets, reasonable valuations and generally predictable distributions are well positioned for the long-term.
If you have any questions regarding any parts of your portfolio, please do not hesitate to contact your adviser as we are always happy to help.