Following its annual review of the hybrid property sector, Lonsec has placed eight out of its 10 rated funds on watch, due to liquidity concerns or frozen redemptions.
Only two funds, AMP Core Property Fund and Charter Hall Umbrella Fund received Lonsec's top rating of highly recommended.
Shortly after the release of the ratings, however, the Charter Hall fund was also placed on fund watch, Lonsec's Property & Infrastructure senior investment analyst Paul Pavlidis told InvestorDaily yesterday.
"That is because the manager has elected to freeze redemptions on that fund, so as of today there is only one highly recommended fund," he said.
Despite a number of hybrid property funds recently moving to freeze applications and redemptions, Lonsec's annual review found the liquidity of most of its funds to be appropriate under ordinary market conditions.
"Negative sentiment in general, towards this sector in particular, has resulted in increased outflows, which has made it increasingly difficult for hybrid property funds managers to manage their liquidity levels," Pavlidis said.
The review found the market downturn had also significantly reduced the hybrid sector's exposure to listed property.
The current weighting to listed property for funds in the Lonsec hybrid universe was 26 per cent, which was well below the average allocation of 42 per cent.
"While most managers are currently underweight listed property, many are looking to take advantage of the relative market value and move their funds into overweight positions," Pavlidis said.
