A wolf in REIT's clothing

A wolf in REIT's clothing. After enduring the heat of excess leverage and insufficient cash flow the A-REIT sector has reformed greatly from its pre GFC excesses and subsequent Icarus moment. Despite the underlying fundamental risks now being far lower than seven years ago, the valuation risks facing investors are almost as extreme today as they were then. Recent performance can sometimes be a useful guide to future performance however often the sign is reversed - having outperformed Australian equities by 3.5% p.a. over the past three years and subsequently pushed valuations to levels not seen since just before the GFC our view would be the recent past has sown the seeds for a risky future. With a market obsessed by a single factor - the reach for ever smaller yields, and an increased acceptance of leveraging up the spread - complacency concerning other risks and the relative pricing of A-REITs to other assets underpins an underweight exposure to the sector in the Australian multi asset portfolios. Full article: (VIEW LINK)