Benefits of investing in FPP

FPP provides investors the following potential benefits:

• an active Investment Manager with significant funds management experience, an international operating platform, and specialisation in global real estate markets;

• an experienced Responsible Entity who will operate the Fund in accordance with its duties to Unitholders both at general law and under the Corporations Act;

• exposure to global real estate securities and the broader real estate sector in a form that is not presently available on the ASX;

• an active investment approach from the Investment Manager encompassing a combination of top-down analysis of geographic economic and real estate sub sector opportunities, combined with bottom-up analysis of identified individual securities to build a rigorous portfolio of investment opportunities;

• access to consistent, regular and attractive distribution yields reflecting the underlying rental income received from the investment entities real estate holdings;

• a possible tax benefit via the trust structure of the Fund;

• equity investments backed by and which should reflect the asset value and rental growth attributes of the underlying real estate; and

• a listed investment trust structure, providing investors the high level of liquidity associated with an ASX listed investment.

About the Fund

FPP is an ASX listed Investment Trust investing in listed global real estate equity opportunities in developed markets around the world.

Real estate as an asset class provides physical space requirements for individuals and businesses. Properties are typically leased to multiple tenants who generally take multi year lease contracts, often with annual rental escalations of at least inflation.

The objective of the Fund is to provide investors a total return consisting of capital appreciation and dividend income.  With a value driven approach, the Fund will invest primarily in global listed REITs where the share price implies we are investing into the underlying real estate at below its market value.  

The global diversification to real estate markets and operators, overlaid with a medium weight exposure to the Australian real estate sector and a small potential exposure to other real estate exposure via ETF's provides investors with a strategy which is unique in Australia particularly from a listed perspective.

Investment philosophy

Fat Prophets has developed the Investment Philosophy being employed by the Fund over many years, drawing on the experience the CEO Angus Geddes has gained as a stock broker, stock and market analyst and portfolio manager and which portfolio manager Simon Wheatley has gained as a very experienced multi decade sector focused analyst who has been leading domestic and international equity research teams. Fat Prophets believes that security markets are inefficient, particularly over short to medium periods of time.

In part this is due to inefficient dissemination of information but a more widespread cause is human behaviours such as collective emotional bias. As a result both individual stocks and whole sectors and markets can become either over or undervalued, often to a significant degree. Globally these mispricings can be more amplified particularly within a set asset class such as Real Estate where there is high tangible value underlying the share price.

Over time however, economic fundamentals will return market prices to their correct level, allowing value creation through active investment management. Fat Prophets has found that by identifying such valuation distortions through a combination of top down and bottom up research and then taking a contrarian stance to position portfolios appropriately it is possible to outperform markets as a whole after allowing for costs over the medium to long term. The fundamental investment philosophy is that the share market is not perfect in the short term at determining the appropriate price for every security (or there would not be share price volatility).

Rather, real estate fundamentals and the underlying drivers of demand and therefore rent and capital value revealed over time are the drivers of long term share price movements. By analysing the current long term worth of a company amidst the short term share price volatility there is an opportunity to ignore companies that are presently perceived to be over priced and attempt to purchase companies that are presently perceived by the Investment Manager to be good value.

To do this successfully takes an investment process that incorporates a regime of analytical rigour, dispassionate risk analysis and disciplined portfolio construction.

How we invest your money

The Fund will be invested in a range of entities listed (or soon to be listed) on global developed market stock exchanges which the Investment Manager believes have attractive real estate operations and investments, and whose securities prices offer attractive value. The investment strategy will target income yield as well as identifying undervalued or mispriced opportunities where a catalyst for future capital relative value appreciation is identified.

The Fund will hold an actively managed Portfolio of typically:

• 85% - 100% of the market value of the Portfolio invested in global listed real estate related securities; and

• Up to 15% of the market value of the Portfolio may also be held in cash. The Investment Manager will determine how much cash is held at any time depending on factors including the availability and attractiveness of stock investment opportunities and market sentiment.

• The Portfolio will be diversified across countries and real estate asset sub-sectors. The investment strategy will broadly weight 25% - 35% of its Portfolio investments to Australia with the balance invested internationally.

• As the Fund will invest typically in 70-90 securities which is significantly lower than the number of stocks in the index, this will result in concentration and conviction investments compared to the index. The Fund may continue to hold an investment that delists or fails to list where the Investment Manager considers it is otherwise consistent with the Investment Strategy for the Fund.