At an RRE GPS media briefing in Sydney attended by InvestorDaily, RRE GPS portfolio manager Scott Crowe explained the importance of actively managing real estate securities and avoiding a static portfolio.
Mr Crowe said RRE GPS looks to invest in high quality growth companies that are “able to deliver superior earnings and intrinsic value growth through their superior business model, through their management and the assets they own”. He said the company’s investment process involved a bottom up micro-economic analysis using discounted cash flow.
“RRE GPS uses a proven investment process and strong track record to search the broader universe of 300 stocks and filter through to an investment portfolio of 50 to 70 securities,” said RRE GPS portfolio manager and head of Asia Pacific John Snowden.
RRE GPS holds the view that the real estate market is shifting towards a growth phase, which it believes will provide Australian investors with an opportunity to generate returns and earnings growth from global property securities.
Mr Crowe said he was optimistic about an improvement in real estate markets given the increase in demand, the rate of rental growth and the availability of capital. He said that most importantly, construction is still limited, ensuring global longevity for this part of the cycle as supply will generally be constrained.
“We believe our approach to investment, which concentrates on companies that can access growth, is very timely in terms of where we are in the cycle,” said Mr Crowe.
Mr Snowden said Australian investors should focus on having diversified portfolios through global property securities and move away from the Australian REIT sector due to the high concentration levels in a few large companies.
“Five companies account for over 80 per cent of the A-REIT market capitalisation, and Australia is a very small player globally – less than five per cent of the global real estate share market,” said Mr Snowden.
“We still have some way to go and the Australian sector is still maturing,” he added.
