The strategy of the Fund is to invest in a diversified portfolio of thematic real assets. The Fund’s 20 investments are set to benefit from four socio-economic mega trends: ageing population (15.7% portfolio weight), digitalisation (29.2%), generation rent (16.3%), and urbanisation (12.7%). It will also invest in REITs with assets that encompass more than one of these trends (24.8%).

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 September, the NAV of the Fund decreased by 3.5% (A Acc GBP), compared to the UK real estate index* which decreased by 5.8%. Since its launch, the Fund has increased by 1.5% (A Acc GBP), outperforming the UK real estate index* which has fallen by 13.2%.

UK equities rose in September, with the FTSE 250 again outperforming the FTSE 100. However, renewed attacks around the Strait of Hormuz pushed oil back above $100 a barrel, and August’s inflation data showed CPI rising to 3.1% from 2.9%, as energy costs continued to feed through to prices. The Bank of England held rates at 3.75%, though three members voted for an increase. Uncertainty over how Chancellor John Healey’s 28th October Budget will fund the Government’s commitments continues to weigh  on sentiment.

All mega trends delivered negative returns in September. Ageing population held up the best, down 1.1%, followed by generation rent and multi-theme assets, down 3.5% and 4.1%. Digitalisation and urbanisation fell 5.3% and 6.1% respectively.

M&A activity continued throughout the month with multiple deals reaching their conclusion.

Picton shareholders voted in favour of the all share offer from listed peers LondonMetric (portfolio weight 8.7%) and Schroder REIT (portfolio weight 7.0%). Picton shares were cancelled during the month, and investors received their allotment of LondonMetric and Schroder REIT shares, explaining the intra month increase in the Fund’s exposure to these names.

On a similar note, SEGRO (portfolio weight 9.5%) shareholders voted in favour of the best and final cash and stock offer from Prologis. The deal is due to complete in the first half of 2027.

Finally, Harworth’s Board recommended a best and final cash offer of 187p per share from the company’s largest shareholder, Peel Group. This was Peel’s third offer and represented a 30% premium to the undisturbed share price, an 8% increase on its initial offer, but still a 16% discount to NAV. Believing the business to be worth substantially more than the initial offer, the Fund Manager continued to acquire shares in Harworth as negotiations progressed. Harworth delivered a 56% total return during Q3, contributing almost one percentage point to the Fund’s performance. Despite this positive contribution, the Fund Manager was a reluctant seller once Peel gained control, believing the final offer still failed to reflect the company’s true worth to a motivated buyer.

M&A aside, the best performing position in September was Target Healthcare (portfolio weight 8.4%). The share price responded positively to a strong set of full-year results. Target’s rental income grew by 4% on a like-for-like basis, contributing to an 8% increase in EPRA earnings per share and a steady 3% increase in the dividend, which remains well covered. The company’s portfolio of almost 90 operational care homes remains in good health, with values increasing by 5% on a like-for-like basis. The Board has expressed an ambition to “scale accretively” and to that end Target’s pipeline of investment opportunities is currently “significantly in excess of available capital”.

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 inflationary concerns continue to impact capital markets, the four socio-economic mega trends - ageing population, digitalisatio n, generation rent and urbanisation - are set to gain.

*MSCI UK IMI Core Real Estate Net Total Return GBP