European equities were the strongest performing region with the EuroStoxx 600 returning +6.4% in the first month of 2025. The S&P 500 managed just +2.7% as US tech stocks suffered a setback in the market’s expectation of their dominance in AI development. The correction in the US in the last week of the month reminded market participants of the narrow tech focus and high multiples of the ‘mega tech’ growth names.
The pan-European real estate equity ‘value corner’ also exceeded the S&P 500 with a total return of +3.9%. The Trust’s NAV was fractionally ahead with a total return of +4.0%. Whilst the month-end figure is encouraging, the four weeks of trading since we welcomed in the new year was a rollercoaster. Early January saw a continuation of 2024, a general malaise towards real estate, which was perceived as cheap but with slow growth and ongoing interest-rate sensitivity. However, as the month wore on, we saw a steady improvement of investor sentiment towards ‘all things European’ and our domestically focused names caught a bid. Market fundamentals remain robust in so many of our sub-sectors and the new year has already brought a steady stream of evidence from market transactions to support our thesis of ongoing bifurcation. Essentially tenants (and investors) are paying up for best-in-class buildings in premier locations.
Our overweight towards European shopping centres was an important driver of returns. Investors like the high income yield and stability of earnings, as we do. Possibly counter-intuitively, French offices were another strong performer. We agree with investor concerns about the lack of rental growth when office markets are viewed holistically but again best-in-class is performing well. The lack of supply (and vacancy rate of less than 4%) in Central Paris is driving rental growth. Peripheral markets such as La Defense, much like London’s Docklands, are suffering from older buildings and rapidly rising vacancy.
Our UK small caps did well, particularly Picton Property, where 4.2% of the Trust’s assets equates to 15% of this well-managed, but small, diversified REIT. It had been trading at a very wide discount and recently published an increase in its December 2024 NAV to 98p when the shares were trading at 61p. Alongside the new net asset value, it announced a modest buyback (£10m) which is helpful. The stock gained 5.2% post announcement of the buyback. We see this as a baby step in the journey to close the gulf between asset value and share price. If the board believes in the asset valuation, then nothing is cheaper than their own portfolio at a 30+% discount. Buybacks at these discounts are highly accretive. Investors will soon get the message that the non-executives have not abandoned them and are determined to do something about it. It becomes self-reinforcing. The last two years has also seen a raft of companies being bid for – private equity stepping in to hoover up listed companies abandoned by disenchanted investors. The market wants larger, more liquid names with greater cost efficiencies – just look at the performance of London Metric, an active consolidator. In this environment your share price is a currency and trading at large discounts (to asset value) leaves you in a more vulnerable negotiating position.
Discrete rolling annual performance (%)
Performance data is in GBP £ terms. Investors should be aware that past performance should not be considered a guide to future performance. All fund performance data is net of all fees and expenses.
As at date 30.06.2026
| 2025/2026 | 2024/2025 | 2023/2024 | 2022/2023 | 2021/2022 | |
| NAV (Inc) | – 0.5 | 11.6 | 22.5 | – 19.3 | – 16.5 |
| Benchmark | – 0.1 | 9.7 | 21.4 | – 19.8 | – 21.5 |
| Share Price | – 2.0 | 13.8 | 22.5 | – 24.5 | – 13.5 |
