The Trust’s net asset value (NAV) fell -7.5% in September, the first negative monthly performance in this financial year (31st March year-end). The benchmark, pan-European real estate securities (EPRA Developed Europe, Net total returns) returned an even poorer -8.3% in sterling terms. It was the second-worst performing Global Industry Classification Standard sector (only utilities fared worse) on the back of increasing inflation fears and rising bond yields. Over the month, 10-year government yields soared by around 20-30bps across Europe and the UK.

Pan European real estate equities returned a healthy 3.2% (in sterling) in what is traditionally the quietest month of the year, and the Trust’s net asset value rose slightly more at 3.3%. A tug of war continues between an abundant supply of liquidity (the ’there is no alternative’ mindset) and investor worries; this drives a lack of conviction around the macroeconomics. The Jackson Hole symposium provided little new information for market participants, and bond yields have demonstrated little volatility. For many parts of the real estate landscape, the outlook is favourable. Inflation is here and, whether you view it as temporary or persistent, you want to protect your earnings. For this reason, index-linked income or earnings which respond to economic growth are attractive.

The pan-European listed real estate sector (FTSE/EPRA Developed Europe, net, total return, in sterling) returned +5.8% in July, outperforming wider European equities, which returned +4.5% as measured by Stoxx600 (total return, in euros).

Declining bond yields – notably German 10-year bunds, which were down -25 basis points (bps) to 45bps, and UK 10-year gilts, which were down -15bps – drove real estate equities higher, while the hunt for yield intensified (yet again). The average yield on 10-year government bonds across the G10 is now 0.3%. The concerns over rising interest rates at the beginning of the year now feel like a distant memory and the amount of negative-yielding global bonds, at US$16 trillion, is not far from all-time highs.

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.