The changing risk profile of listed property trusts

The listed property trust (LPT) sector has undergone considerable change in recent years, including increased levels of international property, increased levels of debt, incorporating property development activities via use of stapled securities, significant mergers and acquisitions, and including emerging property sectors in LPT portfolios. By analysing LPT performance over 1996-2006, the changing risk profile of LPTs is assessed. Since 2003, while the "expectation" was for higher LPT risk levels, there has been no evidence of increased levels of LPT risk, particularly in the international LPT and stapled securities LPT sectors. LPT correlations with the stockmarket have also decreased. The resulting risk profile for LPTs sees the traditional defensive characteristics (i.e. low risk) and portfolio diversification benefits of LPTs being retained or enhanced in recent years, with some of the risk having been mitigated by effective LPT risk management strategies.