InvestSMART's Property and Infrastructure Portfolio: March Quarter Review 2021

• Portfolio rose 2.54 per cent after fees in the March quarter.
• No changes were made to the portfolio during the quarter.
• The yield on the portfolio is approximately 2.70 per cent.

Interestingly enough, over the past 52 weeks to March 31, the portfolio is up 18.64 per cent after fees and is fast approaching its highs reached at the end of 2019. That recovery has been driven by several key factors that are relevant to both the international and domestic holdings in the portfolio:

• Central governments are looking to infrastructure spending as a way of driving economic growth, employment and long-term structural needs of their respective nations. This explains why IFRA attributed 1.1 per cent to the portfolio in the quarter. The ETF is up 4.5 per cent over the quarter and 11.7 per cent over the past 52 weeks.

• The reopening of economies and the return to work of populations has seen listed property move higher on returning revenues.

• Property and infrastructure are both benefiting from record low interest rates from central banks which is creating demand levels not seen since 2014 in some cases.

• Central banks and some central governments (i.e., the new Biden administration) are openly stating they will not change the current policy setting for at least two years (2023 in the case of the US and in Australia it’s 2024). This is fuelling the movement into property in particular.

These points explain why the Global Real Estate ETF DJRE surged in the first quarter and attributed over 2.3 per cent to the portfolio. It’s probable, looking at what is taking place to start the second quarter of the year, that the international side of the portfolio will outperform its domestic peers as Australia moves into its next phase of the COVID crisis without the likes of JobKeeper.

On the domestic side of the portfolio, the first quarter experienced several rolling lockdowns across the country with all three eastern states combined with Western Australian experiencing some sort of closure over the period.

This explains the underperformance of Sydney Airport (SYD) and Transurban (TCL) which experienced volatile consumer usage during the period. This theme also feeds into the Australian property listing VAP as listed real estate trusts saw foot traffic fall on these lockdowns. VAP detracted 0.22 per cent in the quarter.

If Australia can hold off further lockdowns in the final three quarters of the year, there is every chance the domestic side of the portfolio can match its international peers and see 2021 be a much more successful year on performance than 2020.