Fund information

July 2012

Pan-European property shares rose 4% in the month and the Total Return of the Ordinary share class NAV was 4.4%. Markets rose sharply at the end of June following the EU summit’s decision to allow the injection of aid directly into stricken banks from next year and to create a single banking supervisor for Eurozone banks.

Subsequently, share prices largely moved sideways until Mario Draghi began what appeared to be a concerted effort by politicians and central bankers to persuade markets that the ECB would (with the blessing of national governments) take steps to shore up peripheral sovereign bond markets following the 2 August rates meeting. Share prices reacted positively to these comments, adding nearly 4% from the 23 July to the month end. With dominated by the impact of comments from Europe’s central bankers and politicans it is not surprising that the UK (+5.3%) and Sweden (+8.9% in SEK) outperformed. With the markets taking Draghi comments positively at the beginning and end of the month, it was Switzerland (-0.5%), the traditional defensive play which underperformed. The Fund’s performance was driven by the overweight to UK stocks, particularly London, as well as Unibail, our largest holding which rose 7.8%. Towards the end of the month our Italian stocks performed strongly in reaction to potential ECB support.

We remain sceptical that the ECB is currently in a position to take decisive action. It strikes us that all roads lead to Berlin. Germany has not yet ratified the ESM and remains concerned about plans that appear to mutualise national debts.

Whilst the ECB can use the securities markets programme (SMP) to buy bonds, it is unlikely to do so in size without support from the Bundesbank. Similarly, it will look for a nod from Berlin before it purchases bonds issued by the EFSF, another source of potential support for sovereign bond markets.

Meanwhile, listed property companies continue to punch above their weight in terms of performance relative to the wider market and the physical property market. They are attracting good support from lenders relative to the wider corporate world and non-listed property companies. Stock selection remains critical and we have had a number of reminders on the importance of management trust and credibility. Management is an important factor in our bottom-up screening process and we are confident that backing the right teams will generate superior returns over time.

The Ordinary share class went ‘ex’ its 4.2p final dividend on 4 July. Based on the month end share price of 156.9p, the current dividend yield is 4.2%.


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Prices correct as of close 2018-02-20. Last Published NAV is as at the previous business day.
Source: Trustnet

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