INVESTORS will be able to dabble in a Property Buy-Write Income Trust for the first time on the Australian Stock Exchange.
Specialist investment manager Aurora Funds Management is looking to raise $150 million to the Aurora Property Buy-Write Income Trust on the ASX.
The trust will sell or write over the counter call options against 10 individual listed property securities in order to generate additional income to the dividend income received from holding the portfolio.
The portfolio of 10 listed property securities will be geared within the trust to an average loan-to-value ratio (LVR) of 50%.
The trust will employ a risk management program, buying three-month over-the-counter put options on each security at 90% of their prevailing price, in order to help protect investors from extreme downward movements in the underlying Australian listed property securities market.
Aurora FM’s director Hugh Latimer said this is an exciting opportunity for investors and will appeal to time poor investors.
He added since 2001, the distribution income yields from property securities have clearly outperformed the ASX 200.
“And in 2006 the average yield of the top 10 property securities was more than 8%. In addition, these property securities have been far less volatile in market downturns.
“We can potentially manufacture a very high yield through this structure and that is going to be very attractive to retail investors looking for this sort of equity-related income returns from what has traditionally been seen as a very stable sector of the share market,” Latimer said. “Buy-write strategies are particularly suited to market sectors that generate high dividend yield with steady or slowly growing share prices. These strategies generate additional portfolio income, while also providing some protection against an unexpected fall in the market.”
Barclays Capital, which has advised on more than $US1 billion of funds in buy-write strategies globally, has been appointed to advise Aurora Funds on the trust’s investment strategy. Westpac is supporting the offer in
The trust will close for subscriptions on July 6 and expects to list on the ASX on July 19.
Australian Property Journal
