March Performance Update

Posted by Grant MacKenzie on Mar 20, 2019, 11:17:52 AM

In February, Australian bond yields continued to rally following the release of mixed economic data, which has prompted a shift in leading economist expectations to an RBA easing bias over the course of the year. In the US, despite an increasingly cautious statement from the US Federal Reserve on its outlook for US growth, there was increasing optimism over a trade resolution with China following President Trump’s decision to postpone an increase in tariffs citing ‘substantial progress’ in discussions. 

 Key Figures

Investment Performance as at 28 February 2019  Month Quarter  1 Year 3 Year  5 Year 

Freehold Australian Property Fund

 0.4% 5.1%  12.8%  7.7%  13.5% 
Freehold A-REITs & Listed Infrastructure Fund*  3.0% 9.4%  15.8%  7.0%  13.9% 

 A-REITs Index**

1.8% 9.7% 18.9% 8.8% 13.9%

*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)

Key Highlights

  • Sydney and Melbourne commercial office markets continue to post strong effective rental growth, underpinned by record low vacancy rates. Industrial assets are in high demand with elevated pricing driving capitalisation rate compression, benefiting from significant growth in e-commerce.
  • On the flip side, retail landlords continue to feel the impact of structural changes that are occuring across the industry with rents and asset values expected to remain under pressure for some time. Weak market conditions were reported in the residential sector, whilst infrastructure stocks posted a solid set of results and the sector's share prices benefited from the recent bond rally.
  • Looking forward, the cautious optimism from equity investors is in stark contrast to the increasingly difficult economic outlook debt markets are pricing in. Central bank policy and political headlines will continue to influence equity market returns and the Fund's defensive bias should perform in an environment of heightened volatility. 

 What we're looking out for this month:

  • The continued reallocation of portfolio weights from retail to industrial - not easy to execute; 
  • The NSW election this weekend, with the result still on a knife-edge; and
  • An increasingly optimistic US trade market.

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

Sincerely,

Grant x2, Simon, Sascha and Omar

Topics: reit, property