Over the course of May 2025, the NAV of the Fund increased by 1.9% (A Acc GBP), the UK Real Estate Index* increased by 3.4%. Since its launch, the Fund has increased by 3.4% (A Acc GBP), outperforming the UK Real Estate Index* which has fallen by 17.2% in the same period.

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 (15.9% portfolio weight), digitalisation (35.4% portfolio weight), generation rent (25.7% portfolio weight), and urbanisation (7.1% portfolio weight). It will also invest in REITs with diversified assets that encompass one or more of these trends (13.8% portfolio weight).

Within each mega trend, the Investment 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.

In May the thematically diversified names within the portfolio were the strongest performing area, increasing by 3.3%**. This was followed by generation rent which increased by 2.9%**. Digitalisation and ageing population also delivered positive returns of 2.3%** and 0.5%** respectively. Urbanisation delivered negative returns of -2.7%**.

M&A activity continued across the portfolio in May. Assura (portfolio weight 5.2%), a developer, investor in, and manager of medical centres in the UK, received a 48.56p cash offer from KKR & Stonepeak. Assura also received an all-share merger proposal from PHP (portfolio weight 4.3%), a REIT that invests in healthcare facilities across the UK and Ireland. The offer consisted of 12.5p cash and 0.3769 PHP shares for each Assura share. The offer from PHP represents an improvement on its original cash-plus-shares bid to trump the all-cash bid from the KKR/Stonepeak consortium. At the time of writing, Assura’s Board is deliberating on the options. Based on what is on offer, the Investment Manager views the bid from PHP – and the opportunity to remain invested and exposed to Assura’s high quality platform of healthcare real estate – as more favourable than the consortium’s.

Urban Logistics (portfolio weight 6.9%), a REIT that invests in warehouses, recommended an offer from LondonMetric Property (portfolio weight 3.3%), a REIT that invests in commercial property across the UK, which was 42.8p cash and 0.5623 LondonMetric shares, with a 150.3p implied value at announcement. The Investment Manager will vote in favour of LondonMetric's cash and shares offer for Urban Logistics. Although the deal does not value Urban Logistics at a premium to EPRA NTA, it is a public-to-public transaction which means the Fund will be able to benefit from future upside via the position in LondonMetric.

After multiple extensions, Blackstone submitted a downwardly revised 109p cash offer for Warehouse REIT (portfolio weight 5.5%), an investor in UK based logistics warehouses, which the Investment Manager is minded to reject on the basis that Blackstone’s latest offer is well below Warehouse REIT’s latest valuation and falls at the wider end of precedent discounts for UK REIT takeovers. The Investment Manager also believes the offer represents an opportunistic acquisition of a high-quality, income-producing portfolio that has been carefully curated over eight years with the sustained support of public equity investors. Since IPO, Warehouse REIT has grown from a seed portfolio of 27 assets into a diversified £805 million estate, delivering an annualised accounting return of 7.7%. The proposed price, in the Investment Manager’s view, fails to reflect the strategic value created—or the time, capital, and commitment contributed by shareholders throughout that journey.

While the Investment Manager welcomes takeover interest, any offer must adequately reflect a company’s long-term value. The key consideration is not simply the premium to the last traded price, but whether the bid reflects the full potential of the underlying assets. Where it falls short, the Investment Manager engages with the company’s Board to advocate for a valuation that represents its true worth.

The Fund undertook a new position in Schroder REIT (portfolio weight 2.5%), a diversified UK commercial property REIT. Schroder REIT has a diversified portfolio with a strong bias towards multi-let industrial and retail warehousing. Both sectors have structural tailwinds and are of potential interest to acquirers and consolidators in light of recent M&A activity. Schroder’s management also have a keen focus on asset enhancement initiatives, with a particular focus on sustainability improvements, with a “green premium” highlighted across several of their assets. They also have an attractive dividend yield of c.7%, which has been growing at a high-single digit rate in recent years. The portfolio has reversionary potential of c.20% over the next few years, which should lead to further dividend growth.

Several portfolio assets released positive results in May. Grainger PLC (portfolio weight 7.4%), the UK’s largest listed residential landlord and manager, announced an increase in EPRA earnings of 23% year-on-year, along with an increase in like-for-like rental growth of 4.4% and dividend growth of 12%. LondonMetric Property (portfolio weight 3.3%) announced an increase in EPRA EPS of 20%, and an increase in EPRA NTA of 3.9% year-on-year. Increased M&A activity is also set to increase their logistics exposure to 55%. Andrew Jones, CEO of LondonMetric, said “We have every reason to be optimistic about our relentless expansion and the opportunities available from our highly scalable platform. In an environment where scale is essential, our £6 billion portfolio is set to grow by a further £1 billion through M&A activity which will add to our urban logistics exposure, our strongest conviction call sector for rental growth.”

Continued M&A activity across the sector, along with the strong earnings performance of portfolio assets highlights the positive growth of the UK REIT sector. We are at a pivotal point for the asset class, with greater investment needed in specialist listed real estate to respond to social and economic changes and increased demographic shifts. 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. There is reason for increased optimism across these mega trends as the Fund continues to invest in defensive, domestic and dependable assets.

*MSCI UK IMI Core Real Estate Net Total Return GBP
**Defined as the calendar month, as opposed to the valuation month