JSE-Listed property funds outperformed the overall market in 2011, and analysts believe that investors can expect decent returns from certain funds in 2012.

Absa property equity fund manager Mariette Warner said investors' best bet will be funds with strong, experienced management teams that are able to manage risk proactively during tough economic times.

‘The funds that performed well last year were mainly those with large retail exposure, as well as mixed portfolios. However, the common denominator among them was management teams with a good track record,’ said Warner.

Coronation Fund Managers' Anton de Goede agreed, saying that companies with proactive management will be supported by investors.

During 2011, listed property generated a total return of 8.8%, outperforming bonds, cash and equities, with the best-performing fund being Fortress B.

Among the larger funds, the best performers were Sycom, which delivered a 24% total return; Investec Property Fund, giving a 23% return, and SA Corporate delivering a 19% return.

‘Listed property is a must-have in any balanced portfolio as it offers better risk-adjusted returns versus equities,’ said Stanlib property fund head Keillen Ndlovu.

‘It has been proven that it reduces the overall volatility in a balanced portfolio.’

Most analysts agreed that trading conditions will continue to be challenging in 2012, but noted that there will be a number of funds and companies worth looking at.

Macquarie First's property analyst Leon Allison preferred Growthpoint and Capital in terms of larger funds and expected returns to be ‘decent rather than exciting’ in the next year.

Among the smaller stocks, Allison favoured Hospitality A shares, with a forecast yield, or income return, of 11% in 2012 and forecast total return of close to 20%.

De Goede suggested that it seems that things are gradually starting to improve from a top-line perspective within the property market.

This improvement is led by retail and industrial sectors, especially those linked to distribution and logistics properties, while B-grade office properties continue to struggle.

Allison said the trading environment is likely to continue being challenging in 2012, with net take-up of vacant space remaining slow and property funds and tenants experiencing further cost pressures.

However, he expected that it would be partly offset by on average 8% annual escalations on about 80% of the property funds' income, which underpins the sector's defensive nature.

Reported by Business Live