Australian REIT and Infrastructure Portfolio
The Royston-Admiral Australia REIT and Infrastructure Fund (ARIF) exists as a Managed Discretionary Account under Royston Capital and advised by Admiral Investment. Admiral is an investment manager licensed by the Hong Kong Securities and Futures Commission that focuses in real estate and related investments across Asia Pacific.
The ARIF is a long only mandate that invests in Australian REITs (A-REITs) and Infrastructure Trust. The goal of ARIF is to provide steady dividend income and capital appreciation through time. The portfolio seeks to outperform the S&P ASX 300 A-REIT Index, on a total return basis, through the medium term. ARIF will be denominated in the Australian Dollar and invested in Australian denominated assets. This mandate invests only in listed vehicles that provide liquidity on a daily basis.
REITs and infrastructure trusts are listed instruments to allow investors to gain exposure to the real estate and the infrastructure sectors. Assets in both sectors are characterized by their relatively stable and transparent cash inflow. Real estate and infrastructure are often seen as inflation hedges, providing growth that is inline with or slightly ahead of inflation through time. Their lease or revenue structure also provides protection during weaker markets. REITs have weighted average lease expiry of several years. Infrastructure Trusts are often regulated by the government, but their demand comes from the wider public and is not subject to the rise and fall of any particular industry. Earnings for both sectors are thus predictable and relatively more stable than many alternatives.
Similar to other Australian companies, management teams of A-REITs and Infrastructure Trusts are monitored by the stock market at large. Top management roles are competitive, especially compared to the rest of Asia Pacific. In particular, the annual vote on top management compensation package is seen as a regular referendum on management performance, and every year there are changes in top management.
REITs are also legally required to pay out most of its net income as dividend to qualify for certain tax benefits. While infrastructure trusts are not required by law to pay out dividends, many maintain a respectable yield to stay competitive with REITs and other higher-yield instruments. In Australia, dividend yield in 2015 ranges from 6% to 9%, and tax benefits are available in the form of franking credits.
S&P ASX 300 A – REIT Index.
REITs and infrastructure trusts listed on the Australian Stock Exchange.
Number of stocks
Generally 12-15. A-REITs will represent between 60 to 80% of the portfolio, and Infrastructure Trust between 15 to 25%. .
The portfolio aims to be fully invested but generally has up to 3% cash at any one time and is otherwise unrestricted.
There is no performance history for the portfolio at this time. For reference, the S&P ASX A-REIT index has provided a YTD return of 9.4% as of October 31, 2015. The Index’s 1-year, 3-year, and 5-year annualized returns are 12.5%, 9.9% and 8.5% respectively. Admiral’s existing track record has produced an outperformance of 300 bps in the last 18 months.
About Admiral Investment
By Victor Yeong
Victor S Yeung M.Sc. (MIT) B.Sc. (MIT) CFA CIMA Adv Dip MA MHKSI
Victor Yeung is the Chief Investment Officer of Admiral Investment Limited, where he oversees all investment programs of the firm. Before Admiral, Mr Yeung was Managing Director, Asia Pacific Securities of LaSalle Investment Management, where he managed the Asia Pacific portion of LaSalle’s Global Real Estate Securities program and its Asia Pacific analyst team. Mr. Yeung is the founder of Admiral Investment, and he commenced LaSalle’s Asia Pacific Securities operations. He was a research analyst with Morgan Stanley and a risk underwriter with American Express.
Mr. Yeung received the following degrees from the Massachusetts Institute of Technology.
- Bachelor of science degree in electrical engineering and computer science,
- Bachelor of science degree in management science,
- Master of science degree in political science.
Mr Yeung is a Chartered Financial Analyst and holds the Advanced Diploma in Management Accounting with the Chartered Institute of Management Accountants. Mr. Yeung has served as a lecturer for the Asia Public Real Estate Association (APREA) and HKSI. He is the author of Admiral’s Field Notes: REITs and Rental Real Estate, a co-author of Transforming Real Estate Finance: A CMBS Primer (2005 and 2006 editions), and an editor of the textbook for APREA’s Certificate for Real Estate Investment Finance program.
Admiral Investment Limited is a Hong Kong based investment manager that invests across Asia Pacific. We are a value investor that focuses in niches where our industry knowledge is a competitive advantage. Our current projects span across a wide spectrum of real estate activities, from direct asset investments to real estate stocks and REITs; and from rental-focused to development deals.