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 (15.4% portfolio weight), digitalisation (29.8%), generation rent (16.7%), and urbanisation (12.7%). It will also invest in REITs with assets that encompass more than one of these trends (25.0%).

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 June, the NAV of the Fund increased by 3.2% (A Acc GBP), compared to the UK real estate index¹ which increased by 7.0%. Since its launch, the Fund has increased by 2.5% (A Acc GBP), outperforming the UK real estate index¹ which has fallen by 11.8%.

In the six months to 30 June 2026, performance was dragged down by a double-digit decline in March as markets reacted negatively to renewed conflict in the Middle East. However, that drawdown conceals the fact that the Fund returned more than 2% in each of the other five months of the period. Overall, the Fund was up 1.4%. The top performing mega trend was ageing population (7.8%). The digitalisation and urbanisation mega trends also delivered positive returns (6.9% and 0.3% respectively). The generation rent and multi-theme sub sectors delivered negative returns (-3.5% and -4.6% respectively). Over the period, the Fund declared two distributions totalling 2.4922p (0.9817p and 1.5105p, A Inc GBP). In aggregate, the trailing 12-month distributions represent a yield of 5.5%.

Looking back over the first half of the year:

In January, Life Science REIT received a cash and shares offer from British Land. The offer valued Life Science REIT at 43p per share, a 21% premium to the undisturbed share price. The Fund Manager took the opportunity to sell the Fund’s position in Life Science REIT following this announcement. Elsewhere, Picton Property Income (portfolio weight 5.2%) announced a strategic review and formal sales process, and activist investor Saba Capital wrote to the board of Workspace (portfolio weight 2.8%) proposing a managed wind-down. Also, the Fund Manager added Whitbread (portfolio weight 2.6%) to the portfolio. Unlike most hotel businesses, Whitbread operates a vertically integrated business model. It is the owner of Premier Inn, the UK’s largest hotel brand with more than 10% market share, as well as a large portfolio of freehold properties.

In February, market commentators coined a new ‘HALO’ trade to characterise investments in Heavy Assets with a Low risk of Obsolescence, for example real estate and infrastructure. The Fund Manager took this a step further with the ‘PACE’ trade – Physical Assets, Compounding Earners – to emphasise that an investment in real assets not only offers potential protection against AI-related disruption, but may also offer an attractive, growing income over time. Separately, Sirius Real Estate (portfolio weight 4.8%), which owns a portfolio of primarily multi-let industrial estates across the UK and Germany, sent a positive signal that green shoots are beginning to emerge in the REIT sector with the successful raise of £77 million of new equity capital, at a small premium to the prevailing share price, in order to fund its acquisition-led growth strategy.

In March, all mega trends delivered negative returns on the back of poor macro performance. However, both Primary Health Properties (portfolio weight 7.5%) and Target Healthcare (portfolio weight 7.9%) reported strong operating results. Both companies are a good fit for the Fund Manager’s ‘PACE’ framework, as mentioned above.

In April, London office landlords Derwent (portfolio weight 2.9%) and Great Portland Estates (portfolio weight 2.7%) performed well, with both benefiting from an increase in demand from AI-related tenants for prime space.

In May, Picton Property Income, which had 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 6.6%) and Schroder REIT (portfolio weight 4.7%).

In June, M&A activity continued, with Prologis, one of the largest REITs in the world, making an unsolicited all-share offer for SEGRO (portfolio weight 8.8%), the largest REIT in the UK. The offer was equivalent to SEGRO’s latest NAV (925p), representing a 25% premium to SEGRO’s undisturbed share price. SEGRO’s Board “unanimously and unequivocally” rejected the “opportunistically timed” offer, which “falls a long way short of SEGRO's own views on value”. A week after the initial announcement, Prologis published a presentation to further explain the strategic rationale of the deal for both sets of shareholders.

The positive performance in first the six months of the year contributes to the Fund Manager’s continued optimism about the Fund’s performance. This is primarily 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