Category Archives: Factsheet

The Trust’s benchmark, FTSE/EPRA Nareit Developed Europe TR in GBP returned precisely 0.0% in the month. On the face of it a dull month but that is far from the reality. The index rose 4.5% to the middle of the month continuing the positive momentum we’ve seen since the end of March. However, from 14^th onwards we saw a steady decline erasing all the growth from earlier in the month as investors once again appeared to worry about inflation and rising yields. We remain of the view that real estate and other real assets will be relative outperformers in an inflationary environment as investors seek index-linked income with pro-cyclical growth opportunities.

May was another positive month for real estate equities, but not quite as dramatic as April, with the benchmark (FTSE EPRA Nareit Developed Europe Total Return index in sterling) up +3.3%. The Trust’s net asset value (NA) grew +3.8%. Continental Europe returned +4.4% in euro terms, comfortably ahead of the UK (in sterling) at +1.8%. The standout performance came from Sweden (up +13.5% in Swedish krone), where we saw very strong performance from the most indebted companies, SBBB (+12.2%), Nyfosa (+10.0%) and Balder (+8.1%).

April was a strong month for pan-European property shares, with the benchmark rising +7.2%. The Trust’s net asset value (NAV) rose +8.2% and the share price +8.5%, so a good month all round. While currencies do not impact relative performance (as all exposure is in line with the benchmark), they do clearly affect absolute returns. The Trust’s non-sterling exposure is c75%, and therefore a weaker sterling provides additional valuation gains. During the first quarter of the year, sterling strengthened against all European currencies by over 5%; this was partially reversed in April. As a consequence, the benchmark when measured in euros returned only +4.9% versus +7.2% in sterling. So, while this was a good month for real estate equities, an important component was currencies, as opposed to organic growth.

A positive month for equities across the board with real estate equities performing broadly in line when measured in local currency. EPRA (ex UK) when measured in EUR returned a respectable +3.2% but in GBP just +1.3% given the continued strengthening of GBP over the last quarter. GBP has now risen over 5% versus EUR since the beginning of the year. This has an impact on our NAV given that the base currency of the fund is GBP. The month’s NAV movement was +1.4% whilst the benchmark rose +1.5%.

Real estate equities had a difficult month, as rising bond rates and fears of reflation pushed investors away. Our view remains firm: for sectors where there is little oversupply, then the demand created by economic reflation is most welcome. Simply put, not all real estate is equal, and we remain focused on asset types that will enjoy rental and capital growth as economic conditions improve. We remain overweight fundamentally sound markets, such as German residential, industrial/logistics across Europe and the UK, smaller office markets (e.g. German and Nordic cities) and self-storage. We favour index-linked income, where earnings will grow if inflation does appear. The vast majority of our companies have taken advantage of very low interest rates, managing to extend duration while also reducing their overall cost of debt. These businesses are eager for the government stimulus to feed through into real economic growth.