Dream run for trusts tipped to end

New research from Merrill Lynch suggests the $40 billion listed property trust sector could lose 3 to 5 per cent of its value over the next few months. The firm recommended not to allocate capital to the LPT sector currently in a statement released last week.

LPTs have had a good run, boosted by lower interest rates and the flight to security by investors. In the year to November 2002 the sector's total return was 14 per cent, well above average. But LPTS are now due to underperform the equity market, says Merrill Lynch. Its new buy/sell indicator suggests the sector will be lower in 2-3 months. Trust outperformance usually lasts between 13 and 15 months says the firm and this time it has lasted 21 months.

Not everyone agrees, however. UBS Warburg is more positive, forecasting a total trust return over the next year of closer to 10 per cent.

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