Resolution Capital Global Prpt Secs II (IOF0081AU) Report & Performance

Growth of $1000 Investment Over Time

Performance Report

Peer Comparison Report

Peer Comparison Report

Latest News & Updates For Resolution Capital Global Prpt Secs II

Resolution Capital Global Prpt Secs II Fund Commentary September 30, 2023

The FTSE EPRA/NAREIT Developed Index (AUD Hedged) produced a total return of -5.6% for the month ended 30 September 2023. Negative total returns were posted in all regions except Japan.

Japan was the best performing market in the global real estate index, returning 0.6% in local currency terms. Japan continues to benefit from rising expectations for inflation and wage growth, as well as governance reforms.

Although the US Federal Reserve held interest rates steady during the month, the dot plot, which charts FOMC projections for the federal funds rate over time, indicated that interest rates have higher to go. As a result, the 10-year yield surged to the highest seen in 16 years, resulting in a broad-based equities sell-off. REIT sectors with high earnings multiples, e.g., industrial and datacentres, were most impacted.

W. P. Carey (WPC), a net lease REIT, announced its intention to spin-off the majority of its office exposure into a new publicly listed entity, Net Lease Office Properties (NLOP). As a result of the transaction, WPC expect to improve their cost of capital, investment spreads, and increase the quality and stability of its cash flow.

Portfolio holding, Kimco Realty (KIM) announced the acquisition of smaller listed rival RPT Realty (RPT) in an all-stock transaction which values the portfolio at US$2bn. RPT owns a national portfolio of grocery anchored open air shopping centres. KIM expect modest funds from operations (FFO) and net asset value (NAV) per share accretion from the deal. In a positive sign for the New York office sector, Wells Fargo paid US$500m, or US$1,375 per sq. ft. for Neiman Marcus’ empty space at 20 Hudson Yards. Wells Fargo intend to convert the space to office use to accommodate its own expansion. There were three notable dividend cuts and/or suspensions over the month.

1. Hudson Pacific Properties (HPP), a west coast office REIT, suspended their quarterly dividend citing prudence amid challenging market conditions, including the Hollywood strikes.

2. Brandywine (BDN), a Philadelphia-focused office REIT, announced that it would reduce its dividend by 20%.

3. In the face of earnings headwinds and challenging conditions in China, Sun Hung Kai (16-HK), a Hong Kong property developer, reduced their dividend payout ratio from 60% to 40-50% of earnings.

Highlighting investor appetite for the data centre sector, Australia’s largest pension fund, AustralianSuper, signed a A$2.5bn deal with DigitalBridge, a global alternative investment manager, to acquire a significant minority stake in Vantage Data Centres Europe, Middle East, and Africa (Vantage EMEA). Vantage EMEA is a developer and owner of hyperscale data centres.

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Product Snapshot

  • Product Overview
  • Performance Review
  • Peer Comparison
  • Product Details

Product Overview

Fund Name APIR Code
? A Product Code is unique a identifier code issued by a group or governing body, to reference products in a large group. For an example, APIR codes are commonly used for Funds and Ticker codes are commonly used for Securities such as ETFs and Stocks.
Structure
?
Asset Class
? An Asset Class breakdown provides the percentages of core asset classes found within a mutual fund, exchange-traded fund, or another portfolio. Asset classes (in microeconomics and beyond) generally refer to broad categories such as equities, fixed income, and commodities.
Asset Category
? An Asset Category is a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulations. Asset categories (or a sub-asset class) are made up of instruments which often behave similarly to one another in the marketplace, looking down to the Asset Category level is important if looking to build a diversified portfolio.
Peer Benchmark Name
? A Peer Index (benchmark) refers to a peer group of investment managers who have the same investment style or category. It is used to compare the performance of one manager to their peer group, which makes it simpler for investors to choose between the vast number of investment managers.
Broad Market Index
? A Market Index (benchmark) refers to a hypothetical portfolio of investments that represents a segment, asset or category of an investable market. Market Indices are used to benchmark managers performance, to assist their style reliability and ability to provide excess returns.
FUM
? Funds/Assets under management (AUM) is the total market value of the investments that a person or entity manages on behalf of clients. Assets under management definitions and formulas vary by company.
Management Fee
? A management fee is a charge levied by an investment manager for managing an investment fund. The management fee is intended to compensate the managers for their time and expertise for selecting finanical products and managing the portfolio.
Performance Fee
? A performance fee is a payment made to an investment manager for generating positive returns. This is as opposed to a management fee, which is charged without regard to returns. A performance fee can be calculated many ways. Most common is as a percentage of investment profits, often both realized and unrealized. It is largely a feature of the hedge fund industry, where performance fees have made many hedge fund managers among the wealthiest people in the world.
Spread
? A spread can have several meanings in finance. Basically, however, they all refer to the difference between two prices, rates or yields. In one of the most common definitions, the spread is the gap between the bid and the ask prices of a security or asset, like a stock, bond or commodity. This is known as a bid-ask spread.
Resolution Capital Global Prpt Secs IIIOF0081AUManaged FundsProperty and InfrastructureGlobal Listed PropertyProperty - Global Listed Property IndexDvlp Global Real Estate145.22 M1.05%0.00%0.4%

Performance Review

Fund Name Last Month
? Returns after fees in the most recent (last) month).
3 Months Return
? Returns after fees in the most recent 3 months.
1 Year Return
? Trailing 12 month returns.
3 Years Average Return
? Average Annual returns from the last 3 years.
Since Inc. Average Return
? Average (annualised) returns since inception
1 Year Std. Dev. (Annual)
? The standard deviation (or annual volatility) of the last 12 months.
3 Years Std. Dev. (Annual)
? The average standard deviation (or annual volatility) from the last 3 years.
Since Inc. Std. Dev. (Annual)
? The average standard deviation (or annual volatility) since the fund inception.
1 Year Max Drawdown
? The maximum drawdown in the last 12 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
3 Year Max Drawdown
? The maximum drawdown in the last 36 months - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
Since Inc. Max Drawdown
? The maximum drawdown since inception - a drawdown is a peak-to-trough decline during a specific period for an investment, trading account, or fund.
Resolution Capital Global Prpt Secs II6.55%13.53%7.41%1.31%3.05%17.36%17.68%17.94%-14.2%-31.05%-69.06%

Peer Comparison

Fund Name Peer Index Name
? A group of individuals who share similar characteristics and interests are called peer groups. Peer group analysis is an essential part of assessing a price for a particular stock in investment research. The emphasis here is on making a comparison, meaning that the peer group constituents should be more or less identical to the company being examined, especially in terms of their main business and market capitalization areas.
12 Months Excess Return
? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.
Excess Return Annualised Since Inception
? Excess returns are an important metric that helps an investor to gauge performance in comparison to other investment alternatives. In general, all investors hope for positive excess return because it provides an investor with more money than they could have achieved by investing elsewhere.
12 Months Alpha
? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market return over 12 months. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.
Alpha Annualised Since Inception
? Alpha is used in finance as a measure of performance, indicating when a strategy, trader, or portfolio manager has managed to beat the market annualized since inception. Alpha, often considered the active return on an investment, gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole.
12 Months Beta
? Rolling 12Month Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).
Beta Annualised Since Inception
? Beta is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole. Beta is used in the capital asset pricing model (CAPM), which describes the relationship between systematic risk and expected return for assets (usually stocks).
12 Months Tracking Error
? 12Month Tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark over the last 12 months. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.
Tracking Error Since Inception
? Since Inception tracking error is the difference in actual performance between a position (usually an entire portfolio) and its corresponding benchmark since inception. The tracking error can be viewed as an indicator of how actively a fund is managed and its corresponding risk level. Evaluating a past tracking error of a portfolio manager may provide insight into the level of benchmark risk control the manager may demonstrate in the future.
12 Months Correlation
? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
Correlation Since Inception
? Correlation, in the finance and investment industries, is a statistic that measures the degree to which two securities move in relation to each other. Correlations are used in advanced portfolio management, computed as the correlation coefficient, which has a value that must fall between -1.0 and +1.0.
Resolution Capital Global Prpt Secs IIProperty - Global Listed Property Index-1.35%-1.07%-0.13%-0.09%-0.09%1.042.53%4.33%0.990.97

Product Details

Fund Name Verifed by SMSF Mates Manager Address Phone Website Email
Resolution Capital Global Prpt Secs IIYes-https://rescap.com/-

Product Due Diligence

What is Resolution Capital Global Prpt Secs II

Resolution Capital Global Prpt Secs II is an Managed Funds investment product that is benchmarked against Dvlp Global Real Estate and sits inside the Property - Global Listed Property Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Resolution Capital Global Prpt Secs II has Assets Under Management of 145.22 M with a management fee of 1.05%, a performance fee of 0.00% and a buy/sell spread fee of 0.4%.

How has the investment product performed recently?

The recent investment performance of the investment product shows that the Resolution Capital Global Prpt Secs II has returned 6.55% in the last month. The previous three years have returned 1.31% annualised and 17.94% each year since inception, which is when the Resolution Capital Global Prpt Secs II first started.

How is risk measured in this investment product?

There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Resolution Capital Global Prpt Secs II first started, the Sharpe ratio is 0.1 with an annualised volatility of 17.94%. The maximum drawdown of the investment product in the last 12 months is -14.2% and -69.06% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.

What is the relative performance of the investment product?

Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Resolution Capital Global Prpt Secs II has a 12-month excess return when compared to the Property - Global Listed Property Index of -1.35% and -1.07% since inception.

Does the investment product produce Alpha over its Peers?

Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Resolution Capital Global Prpt Secs II has produced Alpha over the Property - Global Listed Property Index of -0.13% in the last 12 months and -0.09% since inception.

What are similar investment products?

For a full list of investment products in the Property - Global Listed Property Index category, you can click here for the Peer Investment Report.

What level of diversification will Resolution Capital Global Prpt Secs II provide?

Resolution Capital Global Prpt Secs II has a correlation coefficient of 0.97 and a beta of 1.04 when compared to the Property - Global Listed Property Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.

How do I compare the investment product with its peers?

For a full quantitative report on Resolution Capital Global Prpt Secs II and its peer investments, you can click here for the Peer Investment Report.

How do I compare the Resolution Capital Global Prpt Secs II with the Dvlp Global Real Estate?

For a full quantitative report on Resolution Capital Global Prpt Secs II compared to the Dvlp Global Real Estate, you can click here.

Can I sort and compare the Resolution Capital Global Prpt Secs II to do my own analysis?

To sort and compare the Resolution Capital Global Prpt Secs II financial metrics, please refer to the table above.

Has the Resolution Capital Global Prpt Secs II been independently verified by SMSF Mate?

This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.

How can I invest in Resolution Capital Global Prpt Secs II?

If you or your self managed super fund would like to invest in the Resolution Capital Global Prpt Secs II please contact via phone or via email .

How do I get in contact with the Resolution Capital Global Prpt Secs II?

If you would like to get in contact with the Resolution Capital Global Prpt Secs II manager, please call .

Comments from SMSF Mates

SMSF Mate does not receive commissions or kickbacks from the Resolution Capital Global Prpt Secs II. All data and commentary for this fund is provided free of charge for our readers general information.

Historical Performance Commentary

Performance Commentary - August 31, 2023

The FTSE EPRA/NAREIT Developed Index (AUD Hedged) produced a total return of -2.7% for the month ended 31 August 2023. Negative total returns were posted in all regions except Japan and Europe, with headlines throughout the month centring around half yearly or end of financial year earnings.

U.S. REITs underperformed the global index, returning -3.2% in local currency terms. Inflation trends showed ongoing improvement in August with month-on-month CPI results down to or near long-term trends for most major CPI categories, except for rents. However, wages and wages growth continue to remain elevated preventing the Federal Reserve from signalling the end of inflation concerns. Portfolio exposure to the U.S. contributed positively to relative returns due to stock selection.

Japan was the top performing market in the global index, returning 2.7% in local currency terms. During the month the Japanese economy demonstrated strong GDP growth, spurred by net exports driven by a weaker Yen. Despite a slight loosening of yield curve control (YCC) policy the Bank of Japan (BoJ) continues to maintain an ultra-easy monetary policy, which remains highly accommodative and lends support to REIT earnings. Portfolio exposure to Japan contributed positively to relative returns.

In contrast, Hong Kong was the weakest region, returning -9.7% in local currency terms. The region has suffered from a continued decline in Chinese consumer confidence amid a deteriorating Chinese property market which has prompted several interventions from China’s central bank and the People’s Bank of China (PBoC). Portfolio exposure to Hong Kong detracted from relative returns.

All property sectors posted negative returns in August.

Performance Commentary - July 31, 2023

The FTSE EPRA/NAREIT Developed Index (AUD Hedged) produced a total return of 3.2% for the month ended 31 July 2023. All regions posted positive total returns as evidence of disinflation and rhetoric from central bankers has become less hawkish. Lower terminal rate expectations benefited vehicles with higher financial leverage in July, as evidenced by the outperformance of both Continental Europe and the office sector.

U.S. REITs modestly underperformed the global index, returning 2.8% in local currency terms. Despite the lowest CPI print since March of ’21, the Federal Reserve hiked rates an additional 0.25%. Portfolio exposure to the U.S. contributed positively to relative returns due to stock selection.

Continental Europe was the top performing region returning 9.0% in local currency terms. The market responded positively to signs of disinflation, suggesting that the end of the ECB rate hike cycle could be on the horizon. With elevated leverage in the region, a pause in rate hikes would provide much needed relief. The portfolio’s underweight position detracted from relative returns.

In contrast, Hong Kong was the weakest region, returning 0.4% in local currency terms. The post-Covid reopening trade in China has disappointed thus far, with consumer spending remaining subdued. Overweight portfolio exposure contributed negatively to relative returns, albeit modestly.

Except for self-storage, all property sectors posted positive returns in July.

Self-storage was the weakest performing sector, returning -3.8% in local currency terms. Underperformance was most acute in the U.S., where the operating outlook for self-storage is decelerating from record levels and a nearly frozen housing market weighs on customer demand. Portfolio exposure to storage contributed positively to relative returns due to stock selection.

Office was the strongest performing sector returning 6.9% in local currency terms. Top performers in July were U.S. office REITs with the most pressured operating outlooks and capital markets needs. Underweight portfolio exposure contributed negatively to relative returns.

Retail modestly outperformed in July, returning 4.2% in local currency terms. Despite macro data suggesting that retail sales growth has slowed in many regions, occupier demand has remained robust, particularly for grocery-anchored retail centres. Overweight portfolio exposure contributed positively to relative returns.

There were several notable REIT announcements during the month.

At the end of July, U.S. listed single-family rental REIT, Invitation Homes (INVH), issued $800m of unsecured notes. INVH issued $450m of 5.45% senior notes due 2030 and $350m of 5.5% senior notes due 2033. The U.S. unsecured market remains accessible for REITs with quality balance sheets.

U.S. data centre REIT, Digital Realty (DLR), announced the sale of a 65% interest in two stabilized hyperscale facilities in Chicago into a joint venture with GI partners for $743m. DLR will retain a 35% ownership interest and continue to manage the day-to-day operations. This deal values the properties at a 6.5% cap rate, and puts DLR on track for the ~$2B of planned dispositions in FY23 to fund its >$2B development pipeline.

Europe’s largest retail REIT, Unibail-Rodamco-Westfield (URW), sold its 42% stake in Westfield Mission Valley Shopping Centre for $290m at an 8.5% cap rate. This asset was previously held in a joint venture with CPPIB and reflects URW’s ongoing disposition efforts to improve its balance sheet and liquidity position.

UK student housing REIT, Unite Group (UTG), issued £300m of equity to finance previously announced development projects. The equity raise was well-executed, pricing ~4% below UTG’s unaffected share price. UTG’s successful issuance is likely a signal to other UK REITs with healthy balance sheets that the equity market is accommodative.

The largest U.S. storage REIT, Public Storage (PSA), announced the acquisition of Simply Self Storage from Blackstone’s unlisted REIT (BREIT) for $2.2B. Pricing suggests an initial cap rate of 5-5.5% which PSA expects to stabilize at 6.25-6.75%.

Performance Commentary - June 30, 2023

The FTSE EPRA/NAREIT Developed Index (AUD Hedged) produced a total return of 2.8% for the month ended 30 June 2023.

The U.S. was the top performing region returning 4.8% in local currency terms. The market responded positively to the U.S. Fe deral Reserve pausing its interest rate hiking cycle and ongoing resilience in the broader economy. The portfolio’s overweight position to the region contributed positively to relative returns.

In contrast, the U.K. was the weakest region, returning -7.3% in local currency terms. REITs in the region were pressured as the Bank of England raised interest rates higher than anticipated by 0.5% to 5%. Meanwhile inflation remains stubbornly high in the region, signalling further hikes are likely in order to return it to target levels. The portfolio’s overweight position to the region detracted from relative returns.

With the exception of industrial, all property sectors posted positive returns in June.

Data centres was the strongest performing sector returning 7.2% in local currency terms as investor enthusiasm persisted driven by robust secular tenant demand. Canadian office REIT Allied Properties (AP) capitalised on investor appetite, selling its To ronto urban data centre portfolio to Japanese telecommunications operator KDDI Corporation (9433) for C$1.35bn, an estimated low4% cap rate and a 10% premium to book value. The portfolio’s underweight position detracted from relative returns.

Industrial was the weakest performing sector, returning -1.1% in local currency terms. The sector was negatively impacted by decelerating tenant demand and an elevated supply backdrop. The portfolio’s underweight position contributed positively to relative returns.

Office was in the middle-of-the-field, returning 4.1% in local currency terms. Performance diverged by region with U.S. strength diluted by weakness elsewhere. Late in the month, U.S. office REIT SL Green (SLG) sold a 49.9% stake in 245 Park Avenue, New York to unlisted Japanese developer, Mori Trust, for $2bn ($1.1k/sqft), which reflected a low-4% cap rate. The valuation was meaningfully higher than public market implied values for A-grade quality assets and drove a re-rating in depressed valuations.

Elsewhere, Australian office REIT Dexus (DXS) sold an A-grade asset, 44 Market Street, Sydney, for $393m or AU$12.8k sqm (US$797/sqft) to APAC focussed investment firm, PAG. The deal reflected a meaningful 17% discount to its December valuation.

The portfolio’s underweight position to the office sector detracted from relative returns.

Performance Commentary - May 31, 2023

The FTSE EPRA/NAREIT Developed Index (AUD Hedged) produced a total return of -3.8% for the month ended 31 May 2023. All regions posted negative returns over the month, except for Japan, as the takeout of First Republic Bank by JP Morgan Chase at least temporarily resolved the U.S. banking crisis, with focus shifting toward U.S. government debt ceiling negotiations in Washington.

U.S. REITs modestly outperformed the global index, returning -3.2% in local currency terms as the market digested persistent inflation and another 0.25% interest rate hike by the Fed, coupled with commentary hinting at the potential conclusion of the end of the hiking cycle. Overweight portfolio exposure to the U.S. contributed positively to relative returns.

Japan was the top performing market in the global index, returning 0.1% in local currency terms, and the portfolio’s underweight position detracted from relative returns. Logistics REITs Nippon Prologis REIT (3283) and GLP J-REIT (3281) raised ~$200m & ~$240m of equity in May to acquire logistics facilities.

Hong Kong was the weakest region, returning -8.9% in local currency terms, and the portfolio’s overweight position to the region detracted from relative returns. REITs in the region were affected by multiple factors in China, including a softening Chinese property market and declining manufacturing production.

Continental Europe returned -8.9% in local currency terms, and the underweight position contributed positively to relative returns. The European Central Bank (ECB) raised its marginal lending rate and signalled for additional raises after headline Eurozone inflation accelerated through April, increasing pressure on troubled REIT balance sheets in Europe. Several highly levered European REITs made progress on balance sheet remediation in May through equity raises, asset sales or a combination of both. Castellum (CAST) launched their previously announced SEK 10bn (~US$920m) rights issue which aims to lower net debt/EBITDA to ~11x from 13x and reduce LTV from 44% to 38%. CAST also reported the disposal of 20 properties for the year to date, for SEK 2.3bn (~US$210m) in line with book values.

Meanwhile, German landlords Vonovia (VNA) and Aroundtown SA (AT1) disclosed asset sales for the purpose of deleveraging, with VNA disposing of five newly built assets to CBRE for €560m and AT1 reporting €320m of disposals YTD at close to book value.

Unibail-Rodamco-Westfield (URW) completed two sale transactions during the period, including the disposal of Westfield Brandon, a U.S. shopping centre in Florida for $220m representing a 10% net initial yield and a 4% discount to the most recent valuation. Proceeds from the asset sales will be used to reduce debt.

All property sectors posted negative returns in May, except for data centres.

Data centre REITs was the strongest performing sector returning 3.3% in local currency terms as investors were buoyed by signs of ongoing, robust secular tenant demand. Chipmaker NVIDIA Corporation (NVDA) reported strong first quarter earnings with bullish AI growth projections which have positive implications for future total data centre demand. The portfolio’s underweight position to data centres detracted from relative returns.

Retail was the weakest performing REIT sector, returning -5.8% in local currency terms. The sector was negatively impacted by concerns over tenant credit and a slowdown in retail sales.

Overall, real estate transaction activity remains meagre providing limited evidence for valuers, lenders and investors on which to rely.

Performance Commentary - April 30, 2023

The FTSE EPRA/NAREIT Developed Index (AUD Hedged) produced a total return of 2.0% for the month ended 30 April 2023. All regions posted positive returns in the month except for Hong Kong as there was increased clarity regarding the impact and reach of the recent banking crisis. The urgency with which the U.S. government and The Fed backstopped deposits and a proactive resolution from Swiss policymakers to contain the potential Credit Suisse turmoil appears to have mostly assuaged near-term liquidity and solvency concerns. Inflation appears to possibly be peaking across most global economies, and there has been increased confidence that rate hikes from central banks are nearing a pause.

The UK was the top performing market in the global index, returning 6.3% in local currency terms, and the Portfolio’s overweight position benefitted relative returns. The region reversed course in April after underperforming the rest of the world by more than four percentage points in March. Clean balance sheets in the UK relative to Continental Europe are a tailwind for capital flows in a turbulent environment.

The U.S. had positive returns that modestly underperformed the global index, returning 0.8% in local currency terms. U.S. CPI for the month of March was reported at 5%, suggesting The Fed is nearing an end to its current hiking cycle. The operational outlook for U.S. REITs is solid with constructive commentary by management teams in the current REIT earnings season. Office has been a negative standout that has weighed on the broader U.S. region. Portfolio exposure to the U.S. contributed positively to relative returns due to stock selection.

Hong Kong was the weakest region, returning -0.1% in local currency terms, and the Portfolio’s overweight position detracted slightly from relative returns. After outperforming other regions in March, Hong Kong slid on a relative basis in April on softness in office and luxury residential.

Performance Commentary - March 31, 2023

The FTSE EPRA/NAREIT Developed Index (AUD Hedged) produced a total return of -3.9% for the month ended 31 March 2023. All regions posted negative returns in the month except Hong Kong as the collateral damage of central bank interest rate hikes extended to the banking sector causing heightened liquidity and solvency concerns. Echoing the 1980s Savings & Loans crisis, the failure of Silicon Valley Bank and Signature Bank in the U.S., and the bail-out of Credit Suisse by UBS in Europe, highlighted the fragility of banks with weak capital structures and concentrated asset exposures. The consequences for REITs will take time to comprehend but we anticipate tighter lending conditions and reduced credit availability for those property sectors with weak operating fundamentals, notably U.S. office.

Hong Kong was the strongest region, returning 0.6% in local currency terms. REIT earnings recovery expectations are supported by economic and behavioural trends, which highlighted a sharp rebound in travel and consumption and improving residential sales. Our overweight exposure to Hong Kong contributed positively to performance.

The U.S. modestly outperformed the global index, returning -2.8% in local currency terms. The Portfolio’s overweight position benefitted relative returns. The Fed delivered another 25bps rate hike, as U.S. policymakers balanced taming inflation with calming concerns regarding instability in the banking sector. In light of the banking turmoil, relative strength was broadly observed across U.S. REITs which satisfied three key characteristics: (a) defensive income streams, (b) low leverage, and (c) low exposure to technology/life-science oriented markets such as San Francisco. In turn, our exposure to single-family residential, manufactured housing, seniors housing and net lease sectors contributed positively to performance.

Continental Europe was the weakest region, returning -12.4% in local currency terms. Troubles in the banking sector added to the challenges facing highly levered European REITs. Remedies to cure elevated leverage and refinancing risk via common pathways (e.g., asset sale or equity raise) are hindered by the higher cost of capital environment. The wave of dividend reductions or suspensions and utilisation of script dividends continued in March. Announcements included German residential REITs Vonovia (VNA) and LEG Immobilien (LEG), and diversified REITs Aroundtown (AT1) and Immofinanz (IIA). Our underweight exposure to Europe contributed positively to performance.

Performance Commentary - February 28, 2023

The FTSE EPRA/NAREIT Developed Index (AUD Hedged) produced a total return of -3.6% for the month ended 28 February 2023. All regions apart from Japan posted negative returns in the month of February. REITs have delivered mixed earnings results with positive Q422 results preceded by 2023 guidance that suggests an expected slowdown in the latter half of the year, with rising operating expenses and interest costs posing a challenge to earnings in 2023.

Japan was the strongest region, returning 2.3% in local currency terms. Japanese stocks rallied late into February after Bank of Japan Governor nominee Kazuo Ueda expressed support for the current ultra-loose monetary setting, signalling interest rates are unlikely to rise in the short to mid-term. Our underweight exposure to Japan detracted from performance.

The U.S. underperformed the global index, returning -4.8% in local currency terms. Positive economic and employment data released in February suggests that the Fed’s efforts to control inflation have been inadequate, leading to a greater likelihood of interest rates staying higher for longer. Sticky inflation concerns and decelerating growth from earnings combined for downward pressure on the U.S. Our overweight exposure to the U.S. detracted from performance.

Hong Kong was the weakest region, returning -6.1% in local currency terms. Geopolitical concerns and uncertainty surrounding Chinese business recovery led to a consolidation in Hong Kong equities throughout February after a strong post-Covid reopening rally since November of last year. Our overweight exposure to Hong Kong detracted from performance.

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  • SMSF Mate is a unique website because it has ideas about how to approach SMSFs, insurance and other financial topics that come straight from first hand experience. It's much more useful than what you find on all the other financial websites that just offer generic info that you could easily get on the ATO's website. It's also nice to know there's no financial incentive behind the information, it's legitimately there to help people understand self-managed super funds and how to get the most out of them, not to get an affiliate commission from a broker or other financial services provider. The investment product information is also incredibly useful, I've never seen this kind of functionality on any other website that let's you look at such a wide range of products, sort by what info is most interesting or important to you, and subscribe to updates for different funds and financial products all in one place. Definitely worth checking out if you own or are considering an SMSF!

    David G, Self-Employed, SMSF Owner
  • SMSF Mate provides a unique insight into superannuation and financial topics in a way that is easier to understand than conventional websites. The colloquial nature of the site makes it easy to understand and they often speak about complicated topics in lamens terms so I can wrap my head around them. The investment product information is a great way to research funds that I am interested in investing in with my SMSF and there is a lot of helpful information on the site for better structuring my investment portfolio. In comparison to other websites which offer similar information, SMSF Mate excels as the information is free to access whereas many other sites charge a subscription fee for the same thing. Overall, I think SMSF Mate is a great resource for SMSF trustees and is worth looking at for a variety of super-related topics. Thanks.

    Tim B, Business Owner, SMSF Trustee