Fundamental – Issue 2
From the Editor: market outlook
HW Funds has had a busy start to the year.
One of the highlights was hosting our bi-annual property market presentation with MSCI in Melbourne and Brisbane. With keynote presenter Benjamin Martin-Henry from MSCI, the sessions were moderated by our own Sean McMahon, while panellists from MaxCap Group, Knight Frank, Australian Unity, City of Brisbane Investment Corporation, and Quintessential Equity provided market insights. Unsurprisingly, the overall message confirmed the property market is facing some challenges at present. The stand-off between buyers and sellers continued in the second half of 2023, which resulted in transaction volumes experiencing the worst annual decline to December 2023 since the Global Financial Crisis (48 per cent). Interestingly, gearing ratios (measured across both listed and unlisted funds) are also at their highest levels (24 per cent) since December 2007 due to the increased cost of debt and decreased asset values. While there are no obvious signs of stress, we expect financiers may begin to have conversations with fund managers about selling assets, raising new capital, and/or restructuring in some way to work through the current cycle. While the consensus is interest rates have peaked, the prospect of a decrease in interest rates is not expected until at least the second half of the year.
Fortunately, it was not all doom and gloom, as there are pockets of encouragement in certain assets classes, including industrial, where capital growth has moderated but remains resilient; retail, which was the relative outperformer when compared with office and industrial; and healthcare, where the demographic tailwinds continue to support demand. These market conditions have kept the HW Funds team busy helping our clients navigate these tumultuous times.
Another highlight has been our involvement in the government Managed Investment Scheme review on behalf of the Property Funds Association (PFA). Following its submission, the PFA organised a follow-up meeting with Treasury in February to seek feedback and continue to advocate for its members. At the meeting, five property fund managers whose businesses rely on wholesale investors impressively presented to Treasury about the significance of the wholesale fund market to the economy and the impact proposed changes to the wholesale investor test thresholds would have on their businesses, particularly in the current environment where it is so difficult to raise funds. As a result, Treasury has requested further information about the market from PFA members to better understand the market. This is promising.
We hope you enjoy this edition of Fundamental, and please let us know if we can be of assistance.
Fundamental – Issue 2 articles
- Conversation with industry leader Melissa Kingham
- Wholesale client tests – what’s the latest news?
- ALRC says financial services laws are ripe for reform
- Proposed labelling regime for sustainable investment products
- ASIC pushes the envelope on litigation in 2024
- Cross-marketing products: navigating the legal issues
- AML/CTF: Answers to your most asked questions
- ASIC case against Block Earner provides guidance for crypto business
- When does the single-sided OTC derivatives reporting exemption apply?
