The VanEck Vectors Australian Property ETF (ASX: MVA) outperformed the S&P/ASX 200 A-REIT Index by 3.8% in 2018, according to a recent note from VanEck.
The VanEck Vectors Australian Property ETF invests in a diversified portfolio of ASX-listed securities with the aim of providing good investment returns over the long term.
According to a VanEck note to clients, the S&P/ASX 200 A-REIT Index returned 2.91% over 2018 while the VanEck Vectors Australian Property ETF returned 6.7% after management fees & costs.
“Listed property was one of the few asset classes that delivered positive returns in 2018 because it is seen as a relatively defensive asset class, delivering a reliable income stream, even as the economy turns down or if the share market drops,” the manager said.
Of the total return, 4.82% was distributed to investors as income and there was a 1.88% rise in the price of the ETF.
How was the VanEck Vectors Australian Property ETF able to outperform its index benchmark despite an annual management fee of 0.35%?
The key was in the holdings and allocation. The VanEck Vectors Australian Property ETF had only 10 holdings at the latest disclosure.
At the end of December 2018, 10.24% was allocated to Charter Hall Group (ASX: CHC), 10.22% to Abacus Property Group (ASX: ABP), 10.11% to Mirvac Group (ASX: MGR), 10.07% to Goodman Group (ASX: GMG), 10.06% to GPT Group (ASX: GPT), 9.96% to DEXUS Property Group (ASX: DXS), 9.91% to Scentre Group (ASX: SCG), 9.87% to Vicinity Centres Re Ltd (ASX: VCX), 9.86% to BWP Trust (ASX: BWP) and 9.65% to Stockland Corporation Ltd (ASX: SGP). The remaining 0.05% was other/cash.
The S&P/ASX 200 A-REIT Index had 18 constituents at the end of 31 December 2018, so the VanEck offering has a more concentrated and equal offering to REITs that are picked to capture the performance of the Australian economy.
This performance comes at a time when residential property prices are tipped to fall even further.
Property researcher Corelogic recently noted that auction clearance rates had fallen to just 43% Australia-wide in the December quarter.
“Sydney and Melbourne are both seeing the impact of significant demand from investors over recent years, along with a substantial ramp-up in new housing supply (largely apartment), much of which was purchased by investors,” Corelogic analyst Cameron Kusher said.
The VanEck Vectors Australian Property ETF is currently valued at an all-time high of $22.66 before today’s trading. According to VanEck, it had a price/earnings ratio of 8.29, a price/book ratio of 1.07 and a dividend yield of 5.09% at 31 December 2018.
The current valuation doesn’t seem too demanding and the nature of its holdings are fairly diversified between retail, industrial and office.
If you are looking for investments with less volatility and a decent income yield, this could be one for your watchlist.