LISTED property fund managers are angry at what they call a eurocentric approach to sector reorganisation on the JSE Securities Exchange SA, which will lump their funds with general property trading companies in a single sector.

The overhaul of the JSE sectors, to come into effect on June 24, is a result of the adoption of the FTSE/JSE Africa Indices.

John Rainer, chairman of the Association of Property Unit Trusts, said yesterday the consolidation of the three property sectors the property unit trust sector, property loan stock and the general property sector into the new real estate holding and development sector would create confusion among investors. Lumping them together with general property companies which had radically different structures, tax liabilities and distribution policies could take away their gains, Rainer said.

'Property unit trusts should have been allocated a separate sector,' he said. 'The property sectors in their current form accurately identify the significant differences between the companies listed in each of these sub-sectors.

'The new real estate holding and development sector would not provide investors with meaningful and comparative information,' he said.

Initial proposals for changes to the sector provided for a specific sub-sector for property unit trustlike instruments, though this was dropped because of a perceived lack of international representation of these instruments.

Rainier said this was a eurocentric view in light of the substantial property unit trust-like markets in North America, Australia and Japan.

Other property fund managers said a sector which incorporated property unit trusts and property loan stocks would have been a sensible compromise as the two had common features.

'The three sectors are three distinct instruments with very different risk profiles,' property loan stock company ApexHi MD Brian Azizillahoff said. 'This unification does not make a great deal of sense.'

Peter Penhall, MD of property loan stock company Redefine, said that while the new sector might draw more attention because of an enhanced market capitalisation, the mixing of profiles was a problem.

The JSE's technical and product development assistant GM, Rudi Bam, said that much of the concern of property funds had been addressed by the decision to continue calculating separate indices for property loan stocks and property unit trusts.

He said the sector changes had to be made as they appeared if the JSE wished to apply international best practice.

He said the reality was that the property unit trusts were active in only three countries and were not a global phenomenon.

Bam said the stock exchange had to adopt the new system as presented or not at all, since the FTSE could not make the provision for a separate property funds sector.

Business Day