The Fund delivered +1.79% return for the month, and +40.0% return for the rolling year.
Key contributors for the year included our high conviction calls to be underweight office exposed stocks such as Mirvac Group (MGR +2.31%) and Dexus Group (DXS +16.27%).
The A-REIT sector rebounded +2.35% in November, albeit underperforming a strong broader equities market, which returned +3.68%.
The sector has held up surprisingly well over the last two months, even as long-end bond yields have risen back up to 4.35%. On a rolling 12-month basis, A-REITs have delivered a total return of +39.2% significantly outperforming the broader equities market by 16%. However, this was mainly driven by two stocks, Goodman Group (GMG+68.4%) and Scentre Group (SCG +46.3%).
Whilst underlying inflation is moderating, there is some upside risks to growth with the re-escalation of global trade issues that may lead to a longer-term return to the RBA’s target levels. This, coupled with the tightness of the labour markets, has led market participants to now expect rate cuts to be pushed out to May 2025.
So, what does this mean for the REIT sector? We believe there is limited downside risk to near-term earnings as:
Our investment process places a high emphasis on balance sheet strength and considers leverage on both a gearing and ICR basis. With interest rates stabilising, we expect transaction volumes to pick up. This was evident during the month where seven large transactions occurred, recording the highest level since July 2022 at $2.8 billion. Encouragingly, these assets transacted at around December book values, providing further evidence that valuations are at or near trough levels.
We continue to support the alternative sector including data centers, real estate credit, and retirement living. Not only does exposure to these sectors provide the portfolio with diversification, but also more sustainable earnings as they are driven by secular trends.
Portfolio Manager
Investment Specialist
A Property Fund focussed on capital security, income yield, and sustainable growth.
The Fund believes each security has an underlying or intrinsic value and that securities become mispriced at times relative to their value and each other.
The Fund seeks to exploit such market inefficiencies by employing an active, value based investment style to capture the underlying cashflows generated from real estate assets and/or real estate businesses.
The Fund believes that responsible investing is important to generate long term sustainable returns. Incorporating ESG factors along-side financial measures provides a complete view of the risk/return characteristics of our property investments.
The Fund is benchmark unaware. All positions are high conviction and assessed on a risk-reward basis, resulting in a concentrated portfolio of 10-20 securities.
1. Net performance figures are shown after all fees and expenses, and assume reinvestment of distributions. The Fund incepted on March 11th 2020. Index performance calculations include a complete month’s performance for March 2020. No allowance has been made for buy/sell spreads. Please refer to the PDS for information regarding risks. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
2. Inception 11 March 2020.
3. Annualised standard deviation since inception.
4. Relative to S&P/ASX 300 A-REIT TotalReturn Index.
* For further information regarding fees please see the PDS available on our website.
