SUMMARY
The listed property sector was down -3.7% for the month as market expectations turned from further rate cuts to rate hikes due to higher than expected inflation figures. In comparison, the Fund returned -4.5%, underperforming the benchmark by 0.8%.
Over the longer term, the Fund is tracking well, delivering a solid return of +9.39% compared to the benchmark of +7.55% for the calendar year to date. This is driven by our exposure to non-benchmark stocks such as Aspen Group (APZ 119.5%), Cedar Woods (CWP +46.5%), Qualitas Limited (QAL 35.5%), and Peet Limited (PPC 29.9%).
Periods of market uncertainty often create compelling opportunities. In listed property, attractive valuations and improving fundamentals are creating a favourable entry point for investors seeking income, diversification, and long-term growth.
Despite rates likely remaining higher for longer, A-REITs can deliver strong performance in such environments. For example, the A-REIT index returned 30.57%, and the Fund delivered 31.19% during the last cycle, which was dominated by 13 rate hikes. Supported by disciplined capital management and a high-conviction, free-cash-flow-driven approach, the Fund remains well positioned across market conditions.
To support existing investors considering increasing their exposure, Pengana will cover the buy-spread on investments in the Pengana High Conviction Property Securities Fund made before 31 January 2026.
If you wish to take up the offer, please reach out to client services on +61 2 8524 9900 or at clientservice@pengana.com.
COMMENTARY
This cycle is different
Even if the RBA raises interest rates again, the backdrop is far more stable, and A-REITs are in better shape than during the post-COVID inflation shock.
We expect volatility to continue as the market digests macro conditions and expectations of where rates will land. However, we believe that investors will be rewarded for investing through the cycle. If we look at the last cycle, there were 13 rate hikes between May 2022 and November 2023, followed by 3 rate cuts. From January 2022 to the end of November 2025, the A-REIT index (and the Fund) delivered a cumulative total return of 30.57% and 31.19% respectively, despite this period being dominated by rate increases.
A-REITs remain an attractive option for investors seeking stability, income, and long-term growth. With attractive valuations, continued improvement in property fundamentals, and a very different backdrop to the last rate-hike cycle, the asset class appears well positioned, even if interest rates rise. Our proven, high-conviction, free-cash-flow-driven strategy is built to keep delivering resilient results in the next phase of the cycle.