Market | Portfolio update
12 | 2021
In December markets have been volatile but generally positive. Equities rallied amid a recovery from the pandemic, before losing some steam on worries about inflation, tighter monetary policy and the new omicron virus variant.
Despite these headwinds, optimism about inflation falling back to normal and omicron is not as deadly as the delta variant gained momentum. As a result, all regions showed positive performance in December. Eurostoxx 50 came in with a gain of +5.81 percent followed by the S&P 500 with +3.79 percent and finally by the Nikkei Index, which was up +1.70 percent.
Overall, the REIT markets did even better in December. The EPRA Global REIT index gained +6.74 percent last month and marked a new all-time high at the end of the year. Like most months in 2021, it was North America with the best performance and a gain of +7.91 percent, followed by Europe with a gain of +4.10 percent. Now for the third month in a row, Asia took third place but now with positive performance of +2.55 percent (all figures in EUR). The UK REIT index outperformed the European REIT Index by 1.0 percent last month and over 10 percent for the whole year.
Our model portfolio ended December with a strong gain of +5.50 percent. Therefore, the overall performance for the year 2021 summed up to +27.35 percent. It also realized +5.65 percent dividend yield for the whole year (gross without withholding tax). In the last month of the year, retail REITs were able to catch up against other sectors and reduced the gap to residential. But Self-storage and industrial were again the best performing sectors in December. This picture is also true for the whole year 2021.
Self-storage was by far the outperformer last year (+91%), followed by industrial/logistics, sectors that maintained solid demand throughout the pandemic. Because of its rally retail ended at the third place together with residential. Within retail performance is varying significantly by sub-sector. Mall owners with food anchor tenants outperformed shopping-center and single-tenant peers. Office and healthcare REITs showed a more moderate performance with more than 20 percent and even the least performing sector “Diversified” gained mor than 17 percent. From a regional point of view, North America (+53 percent) was in the lead and outpaced Europe (+27 percent) and Asia (+15 percent) by far.
Despite the new corona fears, REITs showed a quite strong resilience last year, especially in industrial/logistics and data centers. With over +27 percent performance our model portfolio outpaced our forecasted total return of 12 to 15 percent for 2021 by far. With 5,65 percent dividend yield our active approach showed a clear outperformance against passive index tracking strategies which would have given a result of 2,97 percent only. Additionally, it is a stable income source in a low interest environment.
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Dr. Thorsten Schilling
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