Funds

Premier Pan European Property Share Fund

30 September 2019 - 31 December 2019

Performance

The fund returned 8.3% over the quarter, outperforming the GPR 250 Europe Capped Index (GBP Hedged) return of 7.4%.

The table below shows the discrete annual performance of the fund compared to its comparator benchmarks.

 

31.12.2018-

31.12.2019

31.12.2017-31.12.2018

31.12.2016-31.12.2017

31.12.2015-

31.12.2016

31.12.2014-31.12.2015

Premier Pan European Property Share Fund

27.1%

-7.6%

15.2%

-0.6%

13.8%

GPR 250 Europe Capped Index (GBP Hedged)

27.2%

-6.7%

16.0%

0.2%

13.6%

 The GPR 250 Europe Capped Index (GBP Hedged) is made up of the most liquid property companies and real estate investment trusts in Europe with single constituents capped at 10% and currency exposure hedged to GBP. This makes it a sustainable representation of both the European property securities market and the fund’s investment policy to hedge the currency exposure to GBP and to have individual holdings restricted to a maximum 10% of the fund. We therefore believe this is a meaningful benchmark to help investors assess the performance of the fund.

Market review

The UK segment of the portfolio benefitted from investors returning to UK domestic equities, as firstly the potential for a ‘no deal’ Brexit receded, followed by the removal of political uncertainty in the UK Election result. Many UK stocks had been trading at significant discounts to factor in this uncertainty, and hence saw a material improvement in their ratings. This was most notable in some of the smaller companies with regional UK exposure and positively impacted the fund’s performance.

Outside the UK, the Nordic stocks also produced significant share price improvements, against a background of healthy rental growth combined with high investment demand. These Nordic companies have set a clear precedent in delivering highly energy-efficient buildings, thus enhancing both tenant and investment demand, and we believe equity investors are increasingly going to reward such companies.

Portfolio activity

Following the UK election result, we are increasingly positive on UK regional property, where we expect significant Government investment ahead. We initiated positions in Harworth and Urban & Civic as a result. We have also initiated a position in Stenprop, which is rapidly emerging as a well-run specialist in multi-let industrial in the UK. We see this as an attractive replacement for our holding in Hansteen following its recent takeover by Blackstone.

We increased the holding in Secure Income REIT at a rare discount on some short term weakness. We also increased our positions small caps, McKay Securities and Helical, with both trading at steep discounts despite strongly located assets. We funded this largely through a switch from Shaftesbury.

We participated in the placings in Madrid office specialist, Arima, and in the Norwegian office specialist, Entra. Both score well on creating value through regenerating assets into prime, highly energy-efficient offices, thus driving strong tenant and investment demand.

We also initiated in student specialists, GCP Student Living and Xior, via placings to fund further accretive investments in a sector where we believe the market leaders will benefit from their strong operational platforms.

Outlook

Whilst political uncertainty in the UK has reduced, there are still hurdles ahead in the trade negotiations with the European Union, and we expect this to cause ongoing share price volatility in the UK quoted property sector. Nonetheless, we believe the UK government will drive significant investment, not seen in over a decade, into the UK regions and this should provide a strong tailwind to a number of real estate sectors in the UK regions. On the continent, the ongoing lack of economic growth means the European Central Bank is likely to prolong the low interest rates, with the subsequent search for income to continue the strong demand for well let real estate. We aim to enhance this by predominantly targeting European real estate that is located in the leading European cities, as these are still delivering economic growth.

With buildings being a major contributor to carbon emissions, we are increasingly looking for management teams in our holdings that focus on improving the environmental sustainability of their buildings. On top of the important environmental benefits, this can also be an opportunity, as we believe future tenants and real estate investors will increasingly pay a premium for such energy-efficient buildings. The market is increasingly well positioned for this secular trend ahead, and we believe those management teams who are able to create such sustainable buildings will be the long-term winners. We have also previously commented on the prospect of consolidation in the quoted real estate sector, with strong demand in the private real estate markets against limited sellers (outside of retail), and this provides an ongoing support to share prices in the stockmarket-listed real estate sector, despite the improved share price ratings over the last year.

Source: Premier Fund Managers Limited, January 2020. Performance data taken from FE Analytics, quoted on a total return (income reinvested), bid to bid, UK sterling basis, class C accumulation shares as at 31.12.2019.

Past performance is not a guide to future returns. Reference to any particular stock does not constitute a recommendation to buy or sell the stock.

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Risk and other important information

When you invest, your money is at risk because the value of investments, and any income from them, can go down as well as up and you could get back less than you invested. The past performance of an investment is not a guide to how it will perform in the future. Because there are many different types of investment risk and investors have different attitudes to risk, we are not able to categorise our investments as having a specific level of risk. We would therefore strongly recommend that if you do not have professional experience in matters relating to investments, you should speak with a financial adviser before making an investment decision.

Premier Miton Investors is not authorised to provide investment advice or tax advice. Before making an investment decision, it is also important that you read the key documentation for that investment which is available in the literature section of the website, by contacting a financial adviser or by getting in touch with us directly. See ‘Contact us’ for more information or if you are unsure. You can find more details about the specific risks and literature that are relevant to each type of investment on the individual fund, portfolio or investment trust website pages.

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