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 (15.3% portfolio weight), digitalisation (27.9%), generation rent (15.5%), and urbanisation (11.9%). It will also invest in REITs with assets that encompass more than one of these trends (24.9%).

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 May, the NAV of the Fund increased by 2.2% (A Acc GBP), compared to the UK real estate index¹ which increased by 2.6%. Since its launch, the Fund has decreased by 0.7% (A Acc GBP), outperforming the UK real estate index¹ which has fallen by 17.6%.

Markets continued to improve in May, with most equity markets pushing further into record territory as a tense but improving geopolitical backdrop gave way to increased risk appetite. Hopes for a ceasefire between the U.S. and Iran eased fears around access to the Strait of Hormuz, causing crude prices to fall as supply concerns receded. While the path to a ceasefire remains fragile, with President Trump publicly shrugging off the possible collapse of the negotiations, equities remained positive.

The generation rent mega trend performed well in May, up 4.9%. The other mega trends also delivered positive returns, with ageing population, urbanisation and digitalisation up 3.4%, 2.5% and 0.3% respectively. The multi-theme basket fell by 1.8%.

M&A activity continues to be a prominent feature in the UK REIT sector. Picton Property Income (portfolio weight 5.1%), which has been conducting a Formal Sales Process since the beginning of the year, received an indicative all-share offer from listed peers LondonMetric Property (portfolio weight 6.4%) and Schroder REIT (portfolio weight 4.7%). The offer values Picton at 78p per share, which is a small premium to Picton’s undisturbed share price but a discount to NAV of more than 20%. As it stands, Picton’s Board would be minded to recommend this offer, although it remains to be seen whether Picton shareholders are supportive of the deal on its current terms.

Elsewhere, a range of companies reported strong operating results.

Grainger (portfolio weight 6.6%), which owns more than 11,000 rental homes across the UK, achieved like-for-like rental growth of 3.1% for the 6 months to March, whilst occupancy remains high at 96%. Helen Gordon, CEO of Grainger, said, “Housing is a needs-based asset class. Everyone will always need a place to live. Grainger's rental income is underpinned by wage inflation, with a diversified, growing customer base and targeted asset clusters in the UK's biggest cities”.

Big Yellow (portfolio weight 4.2%), a self storage operator, announced full-year results, with like-for-like revenue up 2.1%. Thanks to robust cost controls, operating expenses increased by just 0.3%, meaning top line growth flowed through to earnings, which were up 2.1% on a per share basis. CEO Jim Gibson plans to retire later this year and will be replaced by the current COO John Hunter as part of a multi-year succession plan.

GPE (portfolio weight 2.4%), which develops offices in London, reported a good set of results. The portfolio increased in value by 4.3% on a like-for-like basis, driven by strong rental growth. GPE’s NAV was up 6.1% and validated by almost £500 million of asset sales during the year, which were achieved at a small premium to book value. GPE’s CEO Toby Courtauld said: “… we remain confident we can deliver a cost of capital beating outcome for the forthcoming financial year and substantial income and value growth over the medium term”.

Overall, the Fund Manager remains optimistic about the Fund’s performance due to 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.

¹MSCI UK IMI Core Real Estate Net Total Return GBP