Grant Berry, SGH Property Income Fund Portfolio Manager

SGH Property Income Fund is a Finalist at a Fund Manager of the Year Awards

26th May 2023

SG Hiscock are pleased to announce that SGH Property Income fund has been recognised as a finalist for the  35th Fund Manager of the Year Award, in the Australian Property Securities Fund of the Year category.

The Awards are designed to recognise and highlight Investment Funds for achieving at least two of the following criteria – exceeding stated investment objectives, delivering alpha above peers and defensive strategy above peers. The shortlisted fund mangers have been selected by the research partner of the awards – Lonsec.

Congratulations to our talented property investment management team – Grant Berry, Stephen Hiscock, Mario Saccoccio and Malcolm Ellis for delivering results for our investors despite a very challenging environment!

The Awards ceremony will take place on 22 June 2023 in Sydney.

On this occasion, we caught up with Grant Berry, Director at SGH and Portfolio Manager for the SGH Property Income Fund, to talk about the fund, the year it has been and where to from here.

What is the core of your investment strategy?

Grant Berry: For our fund, delivery of income is an enduring feature, and importantly, with a strong rental bias. The Fund provides investors the opportunity to invest in real property in a liquid form via Real Estate Securities for many years now.

Our objective is to have a diversified portfolio with at least 10 individual holdings and for no individual holding to comprise more than 15% of the fund.

It is not about replicating an index or being aligned to peer funds.

Being disciplined and applying this approach consistently led to peer leading performance and delivery of primary objective (income to investors). Being “true to label”, having a transparent investment process, all this is paramount to our team, and now we have been recognised for it.

The past few years have not been easy, how did you manage to navigate this period successfully?

Grant Berry: As we know all very well, the last 3 years have been very challenging times for investment markets. We have been through a pandemic, with lockdowns and significant restrictions, and everything else that followed – fiscal and monetary stimuli, changing workplaces, then the reopening of the country. Next came the war in Ukraine, inflationary pressures, rapid rise in interest rates and tightening financial conditions.

But our team is navigating the evolving investment landscape successfully and has delivered solid performance over the past 3 years. Our performance also held up relatively well throughout the sell-off of 2022, importantly, delivering income to investors while sticking to our process and the underpinnings of our objectives.

Having a valuation focus using our “through the cycle methodology” and applying valuation discipline at all times, along the true to label approach have assisted us in navigating through the challenging circumstances of the past 3 years to deliver peer leading performance.

We invest for the longer term, taking a 5-year view.  As a consequence, we also typically have low turnover.

Is it getting any easier investing in AREITs now? Where to from here?

Grant Berry: We will keep applying our process and stay focused on our stated objectives. As we always have. At the same time, we are of the opinion that Australian property is very well placed for the longer term.

One reason for that is population. Recent research from CBRE has Australia’s population to grow by ~14% over the years 2021 to 2030. To add a bit of context – this is more than double the rate of USA and even more so to Europe.

High population growth, coupled with transparent investment environment and generally favourable economic climate is positive for property investment.

Our view is that interest rates are close to peaking, real bond yields (inflation linked bonds) which are a key valuation input are at reasonable levels.  REIT security prices have adjusted downwards over the past 12 months or so, whereas direct property has only started the process.

The questions is, do REITs reflect where direct pricing will go or have REIT prices over adjusted?

Our view is somewhere in the middle, direct property has some softening to go, and REITs may have short term upside.

What about the SGH Property Income Fund in particular?

Linking back to our portfolio, it is currently trading at close to a 20% discount to NTA and similar discount to our “through the cycle” NAV (which captures value beyond just the real estate with some funds management/development).

In our view, this puts our positioning at a comparative advantage to direct property at this juncture and well placed for the medium to longer term.

Thank you for your time, and all the best on 22 June!


Disclaimer:  SG Hiscock & Company has prepared this article for general information purposes only. It does not contain investment recommendations nor provide investment advice. Neither SG Hiscock & Company nor its related entities, directors or officers guarantees the performance of, or the repayment of capital or income invested in the Funds. Past performance is not necessarily indicative of future performance. Professional investment advice can help you determine your tolerance to risk as well as your need to attain a particular return on your investment. We strongly encourage you to obtain detailed professional advice and to read the relevant Product Disclosure Statement and Target Market Determination, if appropriate, in full before making an investment decision.

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