January 2020 Performance Update

Posted by Grant Atchison on Jan 23, 2020 2:00:57 PM
Grant Atchison
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In December, Australian bond yields increased by +34bps to 1.37%, in response to improving US economic conditions, as well as increased macroeconomic certainty with regards to a trade deal between the US and China, and the decisive political victory for Boris Johnson in the United Kingdom. Despite the monthly sell-off in domestic yields, the Australian 10 year bond rate remains significantly below its prior 2.32% rate at the start of 2019.

 Key Figures

Investment Performance as at 31 December 2019  Month Quarter  1 Year 3 Year  5 Year 

Freehold Australian Property Fund

 (1.1%) 1.5%  10.4%  8.7%  10.8% 
Freehold A-REITs & Listed Infrastructure Fund* (2.8%) 0.2%  16.6%  8.5%  10.9% 

 A-REITs Index**

(4.2%) (0.7%) 19.5% 9.5% 11.9%

Listed Infrastructure Index**

(0.9%) 3.6% 31.3% 16.3% 16.1%

Unlisted Property Index***

0.8% 1.4% 5.6% 9.4% 10.4%

*Net of fees

*A-REITs Index is the S&P/ASX 300 AREIT Accumulation index; **Listed Infrastructure Index is a subset of S&P/ASX 200 Index infrastructure sub industries, as defined by the Global Industry Classification Standard (GICS) **Unlisted Property Index is the Mercer/IPD Australia Core Wholesale Property Fund Index


Key highlights:

  • The month was dominated by a number of capital raisings from groups such as Centuria and Charter Hall, totalling $700m in aggregate. This placed additional short term pressure on stock prices and took the total amount of capital raised across the A-REIT sector to $5.9bn for CY19.
  • During the month, many companies announced independent asset valuations, whereby commercial and industrial portfolios continued to demonstrate capitalisation rate compression and market rental growth, whilst retail assets continue to face headwinds. Within the infrastructure sector, Sydney Airport hosted its investor day, outlining its growth opportunities within the aeronautical and commercial aspects of the business. The stock has been a strong recent performer and the Fund trimmed its position in Sydney Airport during the month upon valuation grounds. Meanwhile, speculation that APA Group is nearing its first offshore expansion deal continues to gain traction given the limited opportunities for growth domestically.
  • Looking forward, the upcoming reporting season is just around the corner in February, with companies typically in ‘blackout’ at present. In the interim, macroeconomic factors will continue to influence yields and stock price movements.


What we're looking out for this month:

  • Contintuation of stability across US, China and EU, UK markets and what such macroeconomic factors mean for 2020;
  • Deep in blackout, can we find anymore teasers to prime us for reporting reason;
  • The Australian Open and the rollercoaster that comes with it.

Detailed fund updates:

If you have any questions, please don't hesitate to reach out on enquiries@freeholdim.com.au, or +61 2 9228 1400

 

Topics: reit, property