Resolution Capital Global Property Securities

Ross Macmillan  |  13/09/2016Text size  Decrease  Increase  |  

Ross Macmillan: For Morningstar, Resolution Capital has a number of outstanding qualities, including a very strong investment team and outstanding investment philosophy. The investment team is led by Andrew Parsons, who worked for a number of years at Lend Lease. He is the founder of Resolution Capital. He is also the managing director and portfolio manager. He is backed by a team that is extremely strong and has considerable knowledge and outstanding insights into the global property market. However, importantly, all four portfolio managers undertake the same research, assessment and valuation procedures when they are looking at the real estate stocks that they intend to invest in.

Resolution Capital's investment philosophy is based around a number of important principles. Those principles are very Warren Buffett-like. The first one is, they focus on the real estate asset, not an index or a benchmark. Secondly, they try to understand that real estate property is capital-intensive and is also cyclical. Next, they look at management. They believe that strong stewardship is very important. And lastly, and most importantly, they make sure that there is no permanent impairment to capital. They do not believe that they should be responsible for losing investors' capital.

What gives Morningstar confidence about Resolution Capital is its stable, repeatable and outstanding investment process. Firstly, there is a large universe of global listed real estate stocks. Resolution Capital undertakes qualitative and quantitative research procedures to reduce that number of stocks. It uses its proprietary investment database, Swordfish, firstly to eliminate and evaluate a large number of stocks. It then looks at a number of key factors. It looks at balance sheet strength. It looks at the assets. It looks at the quality of those real estate assets. It looks at the location of those real estate assets. And it looks at factors like occupancy rates. It also looks at long-term earnings ability. It combines all these factors and ranks those global real estate stocks so that it can decide which ones to include in its portfolio. It's important to note that Resolution Capital does this on a sector basis. They look at the hotel sector, the healthcare sector. They look at the industrial sector and they also look at the retail sector for real estate. They look at that across North America, the UK, China, Australia, and Europe and select the best stocks for inclusion in the portfolio.

It's important to diversify across asset classes and certainly global property is extremely important. Resolution Capital will give an investor excellent exposure to a number of sectors in the real estate area. It will give investors exposure to office, industrial, retail, healthcare and hotel property sectors and it will also give great geographic exposure. It has invested in stocks in North America, where it's done extremely well, the UK, Europe, Australia, Hong Kong and China, and also Japan. The flagship fund is currency-hedged and that's important for investors because they don't have to worry about currency movements, just the real estate assets that are included in the portfolio.

Resolution Capital has been consistent, reliable, and outstanding over a number of years and it has a quality bias of real estate stocks in its portfolio, which should ensure that even in a bear market investors get considerable returns.

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