Don’t settle for mediocre returns

July 7, 2015

There is no doubt that commercial property presents a compelling investment in the current low interest rate environment.

With interest rates at all-time record lows, mediocre returns are being readily accepted as ‘the norm’ by far too many investors. Investment advisors, financial commentators, the press and even the Governor of the Reserve Bank are telling everyone to ‘get used to it’.

This has led to a lot of public debate about what is the magic figure needed to fund a comfortable retirement. However, the main point that everyone seems to be missing is that it is not all about the amount but how it is invested that will determine long-term financial security.

Most of the public commentary and assumptions in this area are based on mediocre annual returns of approximately 3-3.5% derived from the long-term risk-free interest rate. The real problem is that this only reinforces the general perception that people should readily accept lacklustre investment returns, without question, when there are much better and higher-returning options out there.

Investment in unlisted commercial property trusts, with an experienced hands-on manager that intimately understands property fundamentals and how to extract maximum asset value, is the standout performer in the field, and Sentinel’s track record speaks for itself.

Sentinel’s unlisted property funds deliver an average net distribution of 12.50% per annum across our entire portfolio. We have topped the PCA/IPD (Property Council of Australia/Investment Property Databank) index of the best performing unlisted retail property funds on total return performance for 35 of the past 36 months and in the most recent monthly rankings claimed 7 positions in the Top 10 for 12 month total return performance.

Sub-standard cash returns, the international volatility of the share market roller-coaster, and the hyped bubble of residential property investment and its over-reliance on negative gearing and inflated gross returns, are the alternatives but pale in comparison to the proven performance of commercial property.

Remember: “you are only diversified when some of your investments perform worse than others.”