Over the course of August 2025, the NAV of the Fund decreased by 3.7% (A Acc GBP), outperforming the UK Real Estate Index*, which decreased by 4.1%. Since its launch, the Fund has decreased by 1.9% (A Acc GBP), outperforming the UK Real Estate Index* which has fallen by 23.3% in the same period.

The strategy of the Fund is to invest in a diversified portfolio of thematic real assets. The Fund’s 22 investments are set to benefit from four socio-economic mega trends: ageing population (13.7% portfolio weight), digitalisation (30.5% portfolio weight), generation rent (21.6% portfolio weight), and urbanisation (9.8% portfolio weight). It will also invest in REITs with assets that encompass one or more of these trends (22.5% portfolio weight).

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.
August was a poor month for the UK-listed real estate sector, with negative returns across all mega trends. Digitalisation held up the best, delivering -2.2%**. Ageing population and multi-theme assets were next, falling by -3.2%** and -3.5%** respectively. Urbanisation and generation rent delivered the worst returns of the month, falling -4.7%** and -5.2%** respectively.

A primary driver of negative returns for the Fund in August was the rise in UK government bond yields, with the 30-year gilt reaching levels not seen for more than 20 years. Whilst negatively impacting sentiment, these moves have little direct impact on the REIT market, where the shorter end of the curve is more relevant to funding. In addition, the average cost of debt is approximately 3.6% across the Fund, with an average term of c. 5.5 years, indicating that the Fund’s investments are currently well capitalised with strong and stable balance sheets.

In contrast to the weak share price performance during the month, several of the Fund’s holdings provided positive updates. Tritax Big Box (portfolio weight 6.6%) released a solid set of interim results, highlighting a 4.6% increase in adjusted EPS, driven by net rental income growth, practical completion of developments and asset management initiatives. Aubrey Adams, Chair of Tritax Big Box said, "There are few listed real estate companies that offer such compelling organic growth potential as Tritax Big Box. Our resilient income profile is underpinned by long-duration contracted revenues, from strong clients on triple-net leases, while our three clear growth drivers provide the potential to grow adjusted earnings by 50% by the end of 2030."

Tritax Big Box also terminated its cash and shares offer for Warehouse REIT (portfolio weight 5.3%). Blackstone's cash offer of 113.4p per Warehouse REIT share, equating to a discount to NAV of more than 10%, is now the only offer on the table.

In other M&A news, Primary Health Properties (PHP, portfolio weight 7.5%) beat KKR and Stonepeak in the race for Assura after receiving acceptances for approximately 63% of Assura's shares. This was a good outcome for the Fund, enabling us to remain invested in a key mega trend via the now enlarged PHP. Empiric Student Property (portfolio weight 4.1%) also received a revised cash and shares offer from listed peer Unite Students (portfolio weight 4.5%), valuing the business at about 91p per share (using Unite's share price as at the end of August). The offer has been recommended by the Empiric Board.

During the month the Fund introduced Shaftesbury Capital (portfolio weight 2.8%), which owns a well-located portfolio of mixed-use assets in the heart of the West End, benefiting from the urbanisation mega trend. Shaftesbury is currently trading at a discount to NAV of more than 30%, despite Norges Bank Investment Management recently acquiring a 25% stake in Shaftesbury's Covent Garden portfolio for £570 million, and valuing that collection of assets at NAV.

Despite the decline in sector performance in August, the Fund Manager remains optimistic about the Fund’s performance due to the continued M&A activity, along with the strong underlying performance of portfolio assets and confidence in the mega trends. This further reiterates the positive growth potential of the UK REIT sector. Investors should look to the attractive, growing dividend yield and the potential for further upside. 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.