In September, increases in bond yields both domestically (+13bpts) and in the US (+16bpts) were a key driver of weakness within listed equity markets, given the long term negative relationship. Bond yields at the long end of the curve rose despite the US Federal Reserve cutting its official cash rate by -25bpts to 1.75% and the RBA cutting to 0.75%. These increasingly aggressive actions by central banks are responses to stimulate economic activity, however, it is questionable whether these actions have so far proved to be successful amid a backdrop of global geopolitical tensions.
|Investment Performance as at 30 September 2019||Month||Quarter||1 Year||3 Year||5 Year|
Freehold Australian Property Fund
|Freehold A-REITs & Listed Infrastructure Fund*||(3.2%)||0.4%||18.0%||7.8%||13.0%|
Listed Infrastructure Index**
Unlisted Property Index***
*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
- Domestically, the economy continues to face headwinds with GDP reporting its fifth consecutive quarterly decline. Retail sales continue their downward trajectory, with the annualised growth rate having now declined for nine consecutive quarters. News headlines citing ongoing store closures continue to impact overall retailer sentiment. Whilst declining bond yields and a lack of transactional evidence are yet to materially impact retail asset valuations, the Team continues to anticipate that a rebasing of valuations is inevitable. As a result, the portfolio remains heavily underweight retail landlords.
- Looking forward, we continue to anticipate a period of sustained low growth for the foreseeable future. This environment will be supportive for defensive equity sectors that display a high level of earnings visibility. At this stage in the cycle, the Team believes that risk has not been priced correctly, and that the valuation gap between prime and secondary grade assets will widen from current levels
What we're looking out for this month:
- Whether subdued business confidence signals the peak of the office market cycle;
- Will the AGM season reveal green shoots in retail from tax cut spending; and
- Who is taking home rugby glory. Can anyone beat the All Blacks?
Detailed fund updates:
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