Reitway Global | Fund Commentary June 2022

                                                                  Reitway Transparent

  • Some investors and analysts believe that the REIT sector could outperform the stock market in the near term.
  • There are 28 sectors and subsectors available in the asset class.
  • Viewing Global and Local Listed Property as the same asset class could be a risk.

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Market Commentary

There was a significant gap between the REIT sectors that are outperforming and those that are underperforming, with differences of close to 30% between those with the biggest negative returns and those that have gone down by less than 10% year-to-date. It is evident in the fact that both the worst performer and the best performer are both from retail subsectors, indicating how different the sectors and subsectors behave in different economic environments.

Our benchmark, the GPR 250 REIT World Index - Net TR produced a total return of -8.14% in US dollars in June 2022, and -13.52% over 1 year. While the declines are on par with those of equites, we believe the sell-off has, in some cases, been unwarranted.

Fund Performance

Apart from our short term 1-year performance, we remain pleased with the excess returns we have delivered over the longer time-periods. Our underweight exposure to the Healthcare sector as well as our higher than index weighting to select Residential and Diversified stocks detracted from our relative returns over the 1-year period. On a country level, our underperformance is the result of our lower than benchmark exposure to North America. While our stock selection in Western Europe boosted our relative returns, our above average exposure to the region detracted from our results.

For May Communication 2022 

Actual annual figures are available to the investor on request

 

REIT Performance versus the broader Stock Market

Despite all US REIT sectors posting negative total returns in June, they outperformed the broader equity market on a YTD basis.

June Pic 1 2022

They declined sharply in the first half of June 2022, and then rallied in the second half of the month. To 15 June, cell tower REITs were down 12.2% before rallying 9.0% in the latter part of the month. Self-storage REITs were down 9.1% before a 5.3% rebound. Lodging/resorts was the only sector that didn’t rebound in the second half of the month; dropping 16.7% to 15 June, with a further 3.6% decline through the end of the month. Recession fears would be the main driver of this.

REITs have continued to report solid earnings and beat expectations, but the market has been more focused on the valuation headwind that higher interest rates are creating for the asset class. However, some investors and analysts believe that the REIT sector could outperform the broader market in the near term. One of the reasons for this is that public REITs bore the brunt of the pain early, and investors are likely going to look to REITs as an inflation hedge.

Outlook

REITs have done a lot of work to increase their resilience, to improve their balance sheets over time, to lower leverage, to lower interest expenses as a percent of NOI and to build business models, and this can really pay off in the recessionary environments we are likely to enter in the coming months.

As of June 2022, our portfolio forward yield was 3.52% and our constituents are expected to deliver high single digit dividend growth per year for the next three years.

Additionally, the discounts to NAV are currently at very attractive levels.

Through our active portfolio management, our focus remains on constructing a diversified portfolio that outperforms not only in rising markets, but also during periods of market stress.

 
For more information on any of our funds please contact oliviat@reitwayglobal.com or on 082 676 6115 

 

Disclaimer

Although all precautions have been made to ensure the reliability of data and information contained in this presentation, Reitway cannot guarantee the reliability thereof. Past performance referred to in this presentation is not necessarily indicative of future performance. Similarly, forecasts contained in this presentation involve risks and uncertainties which may result in future performance, outcomes and results which differ materially from such forecasts. You are accordingly cautioned not to place undue reliance on any historical data, general information or forecasts used in this presentation.

Reitway accepts no liability whatsoever for any loss, damage (direct or consequential) or expense suffered by a recipient as a result of any reliance placed on any information contained in this presentation or any opinions expressed during this presentation. The views, opinions and comments reflected in the presentation represent those of Reitway, associated companies and employees.

Reitway Global (Pty) Ltd

Registration No: 2011/125542/07. A Financial Services Provider licensed under the Financial Advisory and Intermediary Services Act, 37 of 2002. FSP license No: 43747

 

Boutique Collective Investments (RF) (Pty) Ltd (“BCI”) is a registered Manager of the Boutique Collective Investments Scheme, approved in terms of the Collective Investments Schemes Control Act, No 45 of 2002 and is a full member of the Association for Savings and Investment SA. 

Collective Investment Schemes in securities are generally medium to long term investments. The value of participatory interests may go up or down and past performance is not necessarily an indication of future performance.  The Manager does not guarantee the capital or the return of a portfolio. Collective Investments are traded at ruling prices and can engage in borrowing and scrip lending.  A schedule of fees, charges and maximum commissions is available on request.  BCI reserves the right to close the portfolio to new investors and reopen certain portfolios from time to time in order to manage them more efficiently.  Additional information, including application forms, annual or quarterly reports can be obtained from BCI, free of charge.

Performance figures quoted for the portfolio is from MoneyMate, as at the date of this document for a lump sum investment, using NAV-NAV with income reinvested and do not take any upfront manager’s  charge into account.  Income distributions are declared on the ex-dividend date.  Actual investment performance will differ based on the initial fees charge applicable, the actual investment date, the date of reinvestment and dividend withholding tax.

Investments in foreign securities may include additional risks such as potential constraints on liquidity and  repatriation of funds, macroeconomic risk, political risk, foreign exchange risk, tax risk, settlement risk as well as potential limitations on the availability of market information.

Boutique Collective Investments (RF) Pty Ltd retains full legal responsibility for the third party named portfolio.

Although reasonable steps have been taken to ensure the validity and accuracy of the information in this document, BCI does not accept any responsibility for any claim, damages, loss or expense, however it arises, out of or in connection with the information in this document, whether by a client, investor or intermediary.  This document should not be seen as an offer to purchase any specific product and is not to be construed as advice or guidance in any form whatsoever.  Investors are encouraged to obtain independent professional investment and taxation advice before investing with or in any of BCI/the Manager’s products.

Access the BCI Privacy Policy and the BCI Terms and Conditions on the BCI website (www.bcis.co.za).

A feeder fund, that a feeder fund is a portfolio that invests in a single portfolio of a collective investment scheme, which levies its own charges and which could result in a higher fee structure for the feeder fund.