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SYDNEY-Australian listed property trusts that have floated solely to buy assets in the US market could be at risk from adverse currency movements, a senior investment specialist has warned. In an Australian press briefing, Cohen & Steers chief investment officer Joe Harvey warned that Australian companies that have paid above market value for US property assets could be most vulnerable. He added that LPTs have been paying more than their US counterparts for US property assets because the availability of capital is higher in Australia.

"If you use currency swaps to hedge against currency," he stated, "it gives you additional income." But he warned there could be a "day of reckoning" when the income stream that is sold to investors "goes away when currency swaps turn the other way. The companies that have been floating here exclusively to buy US assets are the ones to be most wary of."

He added that Cohen & Steers had reduced its exposure to Australian and US property securities because they are too expensive and that emerging European and Asian markets like Germany and Hong Kong provided better value. But he did say Australian LPTs could still be a good investment as long as dividend payments remained around the 4%.