SUMMARY
The past year has been a challenge for the AREIT sector with rising inflation affecting bond yields and cash rates. With inflation slowing from the peak of 8% to currently 4.6%, markets are starting to factor in a more stable interest rate environment which is supportive of the REIT sector as it impacts valuations and the cost of capital.
A-REITs had a strong rebound in November, with the index up 10.93% as Australian and US bond yields dropped in response to positive inflation prints during the month, dampening probabilities of future rate hikes. With ‘peak rates’ now in sight, investors turned to names that have been oversold over the past year. In particular, fund managers saw the largest gains over the month, with Centuria Group (CNI +27.95%) and Charter Hall Group (CHC +19.95%) among the top performers.
The Fund returned 8.3% in November. The main contributors to performance were Centuria Group and Stockland Group (SGP +16.67%), whilst our holding in Healthco Healthcare and Wellness REIT (HCW -3.64%) and Qualitas Limited (QAL -6.52%) detracted from performance. These two stocks were impacted due to small cap volatility, but we remain confident in their ability to grow earnings over the medium to long-term outlook. For the past 12 months rolling, the Fund returned 2.8% compared to the benchmark of 0.7%.