The strategy of the Fund is to invest in a diversified portfolio of thematic real assets. The Fund’s 21 investments are set to benefit from four socio-economic mega trends: ageing population (15.5% portfolio weight), digitalisation (27.7%), generation rent (16.1%), and urbanisation (11.7%). It will also invest in REITs with assets that encompass more than one of these trends (26.4%).

Within each mega trend, the Fund Manager undertakes fundamental research to identify the most attractive investment opportunities. Combining top-down analysis of socio-economic mega trends with bottom-up fundamental research has yielded good results for the Fund.

Over the course of March 2026, the NAV of the Fund decreased by 14.5% (A Acc G BP). Although disappointing, this compared favourably to the UK real estate index* which decreased by 16.6%. Over the past twelve months, the Fund has decreased by 3.4% (A Acc GBP), slightly underperforming the UK real estate index* which has decreased by 1.6% over the same period. Since its launch, the Fund has decreased by 6.2% (A Acc GBP), outperforming the UK real estate index* which has fallen by 24.7.

Markets retreated in March, with the decline almost entirely driven by newsflow related to the ongoing conflict in the Middle East. Concerns that the conflict will lead to higher inflation led to a sharp rise in interest rates, which affected interest rate sensitive sectors like real estate more than others. At the front end of the yield curve expectations adjusted considerably, with markets now pricing in two 25 basis point hikes in the UK Bank Rate in 2026, compared to an expectation of two 25 basis point cuts at the start of the year! The yield on the 10-year UK government bond rose by almost 70 basis points to 4.9%, peaking at 5.0% intra-month.

For investors in UK listed real estate there were few places to hide in March, and all mega trends delivered negative returns. That said, the ageing population mega trend, which has more defensive characteristics than the other mega trends due to the inelastic nature of demand for healthcare, outperformed the others, falling by 10.5%. The generation rent, digitalisation and urbanisation mega trends fell by 12.0%, 17.0% and 17.6% respectively. The multi-theme basket fell by 14.2%.

Share price weakness aside, both Primary Health Properties (PHP, portfolio weight 7.6%) and Target Healthcare (portfolio weight 7.9%) reported strong operating results.

2025 was an important year for PHP, a diversified healthcare real estate investment trust (REIT), due to the successful acquisition of listed peer Assura, and this set of results provided the first formal indication of how integration is progressing. According to CEO Mark Davies, PHP has adopted a “best of both” approach to combining the two businesses and has already achieved £7.5 million of synergies to date. The market is now keenly watching for an update on PHP’s ongoing efforts to sell the private hospitals it inherited from Assura, with four “credible” offers already received. As it relates to the full year results specifically, PHP grew adjusted earnings per share by 4.3% and its dividend by 2.9%, which means that the company has now grown its dividend for 30 consecutive years, an achievement bested by only a handful of REITs globally.

Target Healthcare, which owns a portfolio of 86 care homes, also delivered a good set of results, in this case for the half year to the end of December. In fact, the 6.8% total accounting return was Target’s strongest since launch. The outlook from management remains positive, and CEO Kenneth MacKenzie said: “ …as we look forward, we continue to have an unwavering commitment to the mission that we set out on to continue to improve the quality of care for our seniors, our desire to scale, our ability to deploy capital is, we believe, self-evident. And we have a desire for a progressive dividend”.

Both companies are a good fit for the Investment Manager’s ‘PACE’ framework – Physical Assets, Compounding Earners – which emphasises that an investment in real assets offers both potential protection against AI-related disruption and an attractive, growing income over time. Jefferies, a research provider, employed the framework in a recent analysis, coining the term ‘PACEmaker’ to characterise healthcare-related companies like PHP and Target.

Elsewhere, Picton Property Income ’s (portfolio weight 5.7%) formal sales process is ongoing. Press reports during March suggested that there are multiple interested parties, including a consortium of LondonMetric (portfolio weight 6.5%) and Schroder REIT (portfolio weight 5.0%), since confirmed by both companies. No formal offers have been made yet, but the fact that M&A activity is continuing despite the geopolitical volatility (and its effects on capital markets) is a strong endorsement of the value on offer in the UK listed real estate sector.

Overall, the Fund Manager remains optimistic about the Fund’s performance with the strong underlying performance of portfolio assets and confidence in the mega trends , alongside continued M&A activity. Investors should look to the attractive, growing dividend yield and the potential for further upside, with the Fund continuing to invest in defensive, domestic and dependable assets. While growth concerns continue to impact capital markets, the four socio-economic mega trends - ageing population, digitalisation, generation rent and urbanisation - are set to gain.

*MSCI UK IMI Core Real Estate Net Total Return GBP.