Macquarie Property Income Fund strategy leads the pack, adds a second manager

08 August 2005

The Macquarie Property Income Fund (MPIF) has topped the performance charts for Australian funds investing in listed property securities for its 1 and 2 year returns to June 2005[1].

The return to MPIF investors for the year ended 30 June 2005 was 29.78 per cent with an income distribution of 17.289 cents per unit, equivalent to an income yield of 18.2 per cent based on 1 July 2004 unit price. The returns for the last 12 months are 11.7 per cent ahead of the ASX 300 Listed Property Trust Index. Furthermore, 45 per cent of the income distribution is "tax deferred", enhancing its value to investors in higher tax brackets.

Announcing the results, Division Director of Macquarie Property Investment Banking, Christopher Andrews said, "Outperforming the benchmarks and consistent returns for investors are key aims of the Fund and we are delighted with the results."

MPIF was launched in June 2003 as one of the only geared property securities funds in the market. The fund strategy is to target a gearing level of up to 50 per cent - for each dollar of subscriptions, up to a dollar is borrowed to increase the size of the total investment. The primary objective is to amplify the income returns to investors by borrowing at a cost below the income yield of the underlying assets and gaining a tax deduction in the fund for the interest expenses. This is known as "positive gearing" - the investment income exceeds the interest expense.

The gearing is monitored to ensure the overall leverage moves in line with interest rates, market valuations and the debt levels in the underlying listed property trusts.

"At a 45 per cent gearing target, the aggregate leverage including the debt of the underlying funds is approximately 66 per cent. This is consistent with industry standards for a prudent level of debt for property. It also compares favourably with the broader equity market, for which the average gearing level of a company is close to 75 per cent and has a substantially lower yield than property," said Mr Andrews.

Risk management is a key to the success of the investment strategy. As a consequence, Credit Suisse Asset Management has recently been retained as the second property securities manager for MPIF. "It was always intended that MPIF be a multi manager fund; now that the fund value has risen to a sufficient value, we have decided to add the second manager. Credit Suisse is a highly regarded manager of property securities with numerous industry awards and will provide excellent risk diversification to support our aim of providing steady returns to investors," said Mr Andrews.

Although the listed property trust market has performed exceptionally well in recent years, Mr Andrews believes that a geared strategy remains attractive for long term investors. "MPIF is about enhanced income yields. Listed trust yields remain strong; capital values are higher than 2 years ago, but for a long term investor over a 5 year period, the prospect of long term capital growth remains sound."

For further information, please contact:

Christopher Andrews
Division Director
Macquarie Property
Tel: 03 9635 8413

Robyn Turner
Senior Communications Manager
Macquarie Banking and Property Group
Tel: (612) 8232 6989

[1] Source:  InvestorWeb and Morningstar

This document has been prepared by Macquarie Bank Limited ABN 46 008 583 542 (MBL) without taking into account the personal objectives, financial situation or needs of particular individuals. Before acting, we recommend potential investors speak to a financial and/or other professional advisor.

Past performance is not a reliable indication of future performance. Due care and attention has been exercised in the preparation of forecast information, however forecasts, by their very nature, are subject to uncertainty and contingencies, many of which are outside the control of MBL. Actual results may vary from any forecasts provided.

Contact us

Please email us for all media enquiries