Pan-European real estate equities continued the range-bound, yet volatile performance (which we have experienced since the end of March) for most of the month. However, the last ten days of May and early June saw a sustained rally as investors preferred value stocks (seen to be undervalued) to growth stocks (companies that are expected to grow faster than the market). On a global perspective, the gap between the two had rarely been wider, and this snap back was sharp. In our universe, this has translated into a strong correction from those stocks that have had the weakest performance since markets began to react to COVID-19 in mid-February. This was primarily in retail, hotels and other consumer-facing real estate.

Pan-European broad equities (measured by the STOXX Europe 600 index, in euros) generated total returns of +6.7%. They shrugged off poor corporate earnings releases and dreadful macroeconomic news flow in April, warmed by the enormous central bank and government support actions. Pan-European property stocks (EPRA Developed Europe, sterling, total returns) returned +1.7%, lagging the wider market. This was possibly due to concerns over surging debt spreads, lease length potentially undermined by bankruptcies, dividend cuts, and a worsening outlook for the consumer-facing property sub-sectors, such as retail, hotel, leisure and serviced offices. However, the picture wasn’t quite so bleak when viewed in euros, with total return for the month at +3.7%. Sterling strengthened over 2% versus the euro over the month, carrying on its bounce from the mid-March lows. The Trust’s net asset value (NAV) rose +2.0% while the share price was up +5.5%, as the discount percentage tightened to single figures.