April 2017

By | 22nd May 2017

A strong month for pan European equities and property was no exception with the benchmark index rising 2.0%. The fund’s net asset value rose 2.9% as a number of significant positions performed better than the market. The share price rose 5.6% and the discount to net asset value tightened further and is now less than 10%.

The macro news was dominated by the result of the first round of the French Presidential election and there was a significant relief rally with the result. The Europe ex UK component of the index, in EUR, rose 2.4%. At the country level, the French stocks collectively rose 2.9%. Whilst this news ‘lifted all boats’ the sector and stock specific news was also crucial in helping investors to rediscover some of their enthusiasm for the sector. The month saw a flurry of results from Sweden, French office and retail names. Swedish companies returned 4.3% (in SEK) buoyed by the news that the proposal for a change in the treatment for deferred and transfer taxes was deemed not ready for discussion by Parliament. It may reappear in the Autumn but that news coupled with strong Q1 figures from virtually all Swedish names helped propel prices upwards. Stockholm’s office market data was again strong putting it firmly at the top of the European capital city performance table. Fabege (an overweight position) returned 7.1% in the month. Paris continues to experience positive momentum on both office take up and, in certain key sub-markets, sustained rental growth and this was reflected in results from both Gecina (+2.6%) and Fonciere des Regions (+4.6%) . Icade (+5.2%) showed a marked slowdown in the pace of rental decline in its poorer quality peripheral assets. French retail stocks also published with Unibail (+2.9%) and Mercialys (+2.3%) both showing improving retail sales with the latter reporting a healthy 3.3% like for like rental growth.

The top regional performer was the UK (+4.8% in GBP) where stocks responded to the positive political news that the a snap General Election would take place on June 8th with the market expecting a significant increase in the Conservative majority which will bolster Theresa May’s position in the Brexit negotiations. At the property level, the MSCI/IPD index published its six consecutive month of positive capital growth with very strong data from the industrial/ logistics sector (+2.4% capital growth in Q1). Central London offices saw further rental growth declines but overseas capital continues to seek prime assets with high profile deals ensuring little chance of valuers’ pushing yields upwards for prime assets. Those companies with London exposure enjoyed a strong month with pure players such as Great Portland (+6.2%) and Derwent London (+4.7%) benefiting as well as the diversified large caps, Land Securities (+4.4%) and British Land (+8.8%) with c.50% London exposure recording healthy returns. Our largest overweight with London exposure is CLS Holdings who announced the sale of their Vauxhall development site at a 40% premium to the December valuation. The stock rose 9.6%. Our other strong performer was the South East office and industrial small cap, Mckay Securities which rose 11.4% in April. Both names made material contributions to our monthly relative performance.

The full year results and final dividend announcement will be made on 25th May.

Download factsheet