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Posted On Thursday, 27 October 2005 02:00 Published by eProp Commercial Property News
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Insurers and pension funds fight rearguard action to keep their property fund performance a secret

Banus van der WaltSouth Africa's top-performing property funds will be revealed this week at the Investment Property Databank (IPD) investment conference.

The IPD has been collecting data for 10 years on about 80% of large SA portfolios to create benchmarks for funds to measure how well their properties are doing.

But how well or badly the funds do is kept secret from their investors.

The IPD reveals only the retail, office and industrial fund winners of the FM/IPD awards and publishes an index from the data.

However, strong pressure from the pension funds adjudicator, new laws and international trends may force the IPD and the fund managers to open up.

Only the listed funds are prepared to enter the competition for the awards - and the IPD does not reveal who came second or, more important, last.

The property portfolios of listed funds are worth R47,7bn. That's a bit more than half the size of the large institutional insurers and pension funds, dominated by Old Mutual, Liberty and Sanlam with portfolios of about R12bn each. Growthpoint, the largest listed fund, has R9bn in properties.

Does institutional coyness have anything to do with listed funds outperforming them by far over the past three years?

For instance, the FM/IPD index of average income return on listed retail properties was 12,3%. Nonlisted funds managed only 8,9%. Total returns for listed funds' offices were 13%; for nonlisted, 8,4%. Listed funds beat nonlisted funds in each category.

The worst-performing listed funds - those in the last quartile of performance making up the indices - managed average income returns on all properties of more than 10%. The worst-performing institutions had an average income of 8,5% on retail, 9,3% on offices and 10,9% on industrial.

Sanlam property chief Banus van der Walt argues that insurer and pension fund portfolios are different from listed ones. "Many institutions keep large land holdings in reserve that give no income," he says. "They also do more of their own development, which means spending money over some years before they get any income back."

But that is not why they aren't participating in the FM/IPD awards.

"Based on our own results we would be happy to disclose our performance to investors," adds Van der Walt. "The main reason we don't participate is that those providing data to the IPD agreed when the index was set up 10 years ago that information would not be made public. One or two funds are seriously considering interdicting the IPD from acting in conflict with that agreement."

IPD MD Stan Garrun is in agreement about the IPD's role as a supplier of data to property owners rather than their investors. "It's a sensitive issue and important for us to get the permission of the institutional participants before we release data beyond the property owners," he says. "The listed funds in the IPD are different; they publish information of their performance openly as a matter of course and are uniformly in agreement with this process."

At this stage even the participants know only what the indices - the average performance of all the funds - are and their own fund performance, not that of other contributors. This contrasts with growing transparency of investment performance around the world. Companies openly compare their performance and that of their competitors to these indices.

The days of local insurer and pension fund secrecy are all but over, however. Occasional expos?of bad property investment - such as the Mines Pension Fund's in Melrose Arch (Property July 30 2004) - and rumours about unjustifiably high fees and overvaluations have put increasing pressure on them.

Pension funds adjudicator Vuyani Ngalwana used section 7d (c) of the Pension Funds Act last week to force Old Mutual to reveal all details of its charge against Mrs B F Kornik's membership of the SA Retirement Annuity Fund. The clause says: "The duties of the board shall be to . . . ensure that adequate and appropriate information is communicated to members of the fund informing them of their rights, benefits and duties in terms of the rules of the fund."

Deputy adjudicator Naleen Jeram says sections 7 and 35 of the act entitle pension fund members to demand information on pensions funds' property performance - "but not insurers". Van der Walt acknowledges that insurance policy holders could use the Freedom of Information Act to get performance figures from the institutions.

"We have a bosberaad with Sapoa, the property owners' organisation, in February to hammer out a policy on information for investors and policy holders," he says. "What we want to achieve is common agreement for measuring that performance over the long term. But I could never support a competition."

 

Last modified on Monday, 05 May 2014 10:24

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