Australian retail investors have shown interest in placing their money in global real estate investment trusts (REITs) since the start of 2012.
"REITs, being an income product, are seeing fresh demand especially out of markets like Japan, the United States and Australia," Principal Global Investors (PGI) global portfolio manager of real estate Alastair Gillespie told InvestorDaily.
"What we are seeing is an increase in demand for defensive sectors because of the general fears of the global outlook.
"We're seeing growing demand for global real estate allocations as the fund flows into both our own products and into those of our peers in 2012 has actually been quite good."
The interest rate cuts made by the Reserve Bank of Australia (RBA) have driven the demand for REITs in the local market as a yield product, Gillespie said.
"Australian REITs have actually had their best performance for quite some time since the global financial crisis (GFC) because of the RBA cutting rates," he said.
"In the Australian situation you actually had an inverted yield curve earlier this year so there was a bit of hesitation for money coming into the sector.
"Now that REITs are starting to look and smell more like the lower risk, defensive proxy that they used to be pre-crisis, they're really starting to come back on the radar screen of defensive yield investors in Australia as a relative safe haven."
Switching from domestic mandates to global has been a key trend occurring in the REITs market over the past few years in Australia and in the United States.
"We've seen a continued trend within both in the consultant market and the underlying clients themselves in terms of seeking broader diversity by either going global or regional, as opposed to just a domestic strategy," Gillespie said.
"Partly that's a symptom of groups like Westfield who's been such a big component in the Australian market."
Asia Pacific strategies are experiencing the most demand as the concern of a global strategy with an exposure to Europe is currently out of favour, Gillespie said.
PGI has also seen demand across the institutional space gain momentum, mainly from small to medium sized institutional investors, he said.
A few mandates switched from Australian to global REITs strategies or new global allocations were made where there may not have been an Australian exposure before.
