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• The Atlas High Income Property Fund gained by 0.4% over June in an eventful period which saw Property Trusts raise close to $1.8 billion from investors,  a sure sign that the market is getting fully valued, especially as most of these raisings were done at a premium to net tangible assets per share. Following the investing adage of “Be fearful when others are greedy”,  we were active sellers over the month.
• The key news in June was the RBA cutting the cash rate to 1.25% which was a historic low and eclipsed previous low of 1.5% from October 1934. For almost a decade, the risk-free interest rate as measured by the Commonwealth Government 10-year bond yield has been relatively stable between 4% and 3%; however, in 2019, the risk-free rate has collapsed halving to 1.25%. This dramatic and unprecedented fall in the interest rate has put downward pressure on the premiums the Fund receives for selling call options. This is due to what in mathematical finance is referred to as the option “Greek” term called rho, which measures the change in the price of the option relative to the risk-free rate.
• In June we issued a new Product Disclosure statement for the Fund which can be accessed by clicking on this link. 

Go to Monthly Newsletters for a more detailed discussion of the listed property market and the fund’s strategy going into 2020.

Move over WAAAX. Dividend payers will be new growth stars

He suggested the growth in the so-called WAAAX stocks (WiseTech Global, Appen, Afterpay Touch, Altium and Xero) would begin to slow, with their valuations driven largely by a fear of missing out rather than by underlying fundamentals. “While the WAAAX companies have interesting products, the market is pricing nothing but blue skies ahead,” he said.

Westpac risks second strike on executive pay

Mr Maxsted acknowledged that in setting short-term bonuses, Westpac had not given sufficient weight to the reputational damage caused by revelations of misconduct at the financial services royal commission. Westpac chief executive Brian Hartzer had his pay cut last year, with his cash bonus down $450,000, or 30 per cent, to $1.04 million.

• The S&P/ASX 200 A-REIT index had a strong month in May gaining +2.4% powered by the developers which posted strong gains after a surprise coalition victory. With trusts such as Goodman and Charter Hall now being valued at over 25 times forward earnings and distribution yields between 2-3%, the market is pricing these trusts as if we were in the early days of a property boom, rather than in one that is unwinding.
• The Atlas High Income Property Fund declined by -0.7% in May due to weakness in the share prices of the consumer staples landlords, as well as last month’s star performer Unibal-Rodamco-Westfield trading downwards in line with global equity markets.
• We remain very frustrated by the Fund’s performance relative to the property index that is being increasingly dominated by developers and fund managers, rather than traditional rent-collecting property trusts. Atlas strongly believe that a portfolio populated with trusts that offer investors recurring earnings from rental income, will outperform through the cycle and allow us to deliver a more stable stream of distributions to the Fund’s investors.

Go to Monthly Newsletters for a more detailed discussion of the listed property market and the fund’s strategy going into 2019.