Where to invest - Daniel Lem
26 October 2017
Since the Global Financial Crisis (GFC) in 2008 the world has become a different place. Regulators have quite rightly tightened their watch and compliance demands on the financial and investment industry, to the extent some organisations have found it difficult to survive and investors have been more cautious.
Despite this, New Zealand has enjoyed a strong economic base for business and property.
We’ve also seen Brexit, Trump and North Korea’s threats. Economic and geopolitical uncertainty and volatility is the new norm, fueled by a continuance of central bank expansionary monetary policy, ongoing low interest rates, and asset inflation.
The world has not seen this set of circumstances before. For New Zealand, our view is when it comes to investing it makes good sense to plan for if or when the clouds come rolling across the horizon – which we know is cyclical.
So how should investors proceed in times of such global uncertainty?
The most common and time-tested strategy is to simply make a beeline for “safe haven” assets.
Gold, treasury bonds, certain real estate investments and defensive stocks like utilities, healthcare, biotech and consumer goods are usually the top picks.
However, these investments also come with their own challenges. The return on treasuries or some of these defensive stocks can hardly be termed as tempting. Investing in real estate can itself be a risky option and often requires substantial time investment to analyse the underlying asset first.
As a response to the changing economic and geopolitical environment, PMG has proactively focused on greater diversification for its investors.
The focus has been to deliver a greater spread of risk, sustainable distribution returns with improved levels of liquidity versus standalone investment properties. PMG now offers a number of dedicated investment property funds with multiple properties diversified by sector, geography and industry segments.
Acquiring quality properties within a property investment fund creates a robust investment vehicle with geographic and tenant diversification. This provides strong and more reliable cashflow and underlying returns.
PMG’s investment funds provide investors with greater choice and the opportunity to spread their risk across multiple properties which they may not otherwise be able to gain access to.
Commercial property investment has merits in that several investors can join smaller investment parcels together and buy shares or units in a fund. At the time of writing, all of PMG’s investment funds are generating gross cash distribution returns of between 7 and 10% per annum which is considered competitive in the current market. Investors also benefit from the feel good ‘bricks
and mortar’ factor and a sector which has performed well in recent times.
While ups and downs in the market are entirely normal and may cause investors to worry about their investments, it has been shown over time that a diversified investment portfolio is a sound strategy to balance risk and returns. It has also been shown that investors who switch in and out of investments in an attempt to ‘time’ the market, perform worse than those who simply held the investments over time.
At PMG, we’re focused on providing greater diversification through creating portfolios of sector or segment – specific properties and achieving strength through economies of scale – we believe this is now essential in managing investment risk and is something a number of our investors have said they enjoy.
Where will you put your hard-earned money?
Director & Head of Investment
The views and opinions expressed in this article are those of Daniel Lem solely. This is not personalised investment advice and readers should always consider taking professional advice before making any investment decision.