January 2021 has been described by one real estate equity broker as ‘a long year’ and that neatly sums up what has been a tumultuous month. The net asset value (NAV) movement at -3.1% and the benchmark fall of -3.7% belies a huge amount of activity which led to very high levels of volatility and significant price changes (both positive and negative) in individual stocks.

No followers of financial markets could have missed the dramatic ‘short squeezes’ created by an army of retail investors coordinating their buying power into a small group of heavily shorted stocks, principally in the US. There was spill-over into Europe in the large Continental shopping centre owners Unibail and Klepierre, which saw prices squeezed up +32% and +34% (peak to trough) over the month and returned +7.6% and +8%, respectively, over January.

December brought a positive end to a difficult year for Pan-European real estate. The Trust’s benchmark recorded growth of +3.7% (GBP) over the month, but finished the calendar year with a total return of -5.7%. Given that over the first quarter of 2020 the benchmark had a total return of -22.7%, the last nine months have brought a period of strong recovery. Encouragingly, financial markets appear to be performing better than expected given the current, weak, economic conditions. Current market performance may seem overly optimistic, but with a huge amount of support from central bank stimulus and deeply negative real rates on many income-generating assets, there is little alternative. We continue to believe that the right real assets will perform well in the post-vaccine environment we expect in the second half of 2021.

What a month. There was a full-scale reversal of October (when our benchmark fell -4.8%), fuelled by the very impressive vaccine news. Markets were keen to look beyond the ongoing repercussions of lockdown and the current restrictions to the sunny uplands of a post-vaccine normalisation. Pan-European real estate equities in sterling rose +12.6%, slightly behind broader European equities (the STOXX 600 index was up +13.9%).

October was a difficult month for pan-European real estate equities, with the benchmark (FTSE EPRA Nareit Developed Europe Total Return Index, in sterling) falling -4.76%. The net asset value (NAV) dropped a little more, at -5.12%. The bright spot was the share-price performance at +1.0%, which saw the discount to net asset value tighten to 6% (from 10%).

Sentiment has weakened again as Europe grapples with a new set of lockdowns. Retail, hospitality and travel-related industries once again bore the brunt of these measures. Encouragingly, schools and universities have stayed open and employees can generally go to work (where they can’t work from home). From an economic perspective, these measures are far less draconian than those imposed in March and reflect the clear imperative to keep all economies running as normally as possible.

Pan European real estate equities fell -0.58% (when measured in GBP) with the Trust’s NAV falling slightly less at -0.22%. The share price fell -4.3% as the discount widened to an attractive level of -15%. When viewed in EUR the sector fell -1.5%, the weakening of GBP added to absolute returns.