Monthly Briefing
Market | Portfolio update
11 | 2022
The rebound continued in November and markets finished the second month in a row in positive territory.
Global stocks edged up in the wake of Fed minutes that revealed most officials expect to slow the pace of interest-rate increases. Recent economic data were weaker than expected and inflation came down. That convinced investors that central banks might not have to tighten financial conditions too much more.
Again, it was Europe that did best the third month in a row with a plus of +9.73 percent which is also the highest monthly increase within the last two years. The Nikkei followed second with +3.63 percent. North America came in on the third place with a gain of +1.21 percent (all figures in EUR). The positive development was also reflected by the global REIT markets. Overall, the performance was weaker than the broader equity markets.
Best region was Asia with a gain of +3.89 percent, followed by Europe with +1.63 percent. North America came in close behind with +1,52 percent. Overall, the EPRA Global REIT Index increased +1.88 percent last month (all figures in EUR). The UK REIT index was up +1.60 percent last month and is still roundabout 510 basis points behind the European REIT index so far this year.
Our model portfolio and our “QSF-DeA Global REITs” fund also ended November with positive performance. Our model portfolio recorded a gain of +3.53 percent (significantly higher than the Global Index last month), resulting in an annual performance of -15.32 percent, which is slightly behind the performance of the global REIT index at -13.34 percent, but the difference is further decreasing.
The performance of our fund “QSF-DeA Global REITs” was positive again last month and recorded an overall performance of -4.22 percent since its inception. Nevertheless, our approach aimed at long-term stable dividend payments is confirmed: so far this year, we have achieved a dividend yield of +6.47 percent (gross excluding withholding tax), which is 200 basis points above the yield of the Global REIT Index.
In November again, most sectors showed positive performance. The best performing sectors were data centers with +13.88 percent and healthcare with +5.53 percent. The worst was self storage with -8.33 percent. The main reason for this negative performance of self storage was mainly due to profit taking by investors.
The rebound of data centers was the result of better-than-expected leasing and income data and that the demand for data center space accelerated in the last months. The good performance of healthcare REITs was driven by high occupancy growth and therefore higher rental income. Especially companies with large senior-housing operating portfolios saw significant occupancy improvement that will extend into 2023.
Improving occupancy and resulting rent growth will help to offset inflationary wage increases that continue to pressure margins. Office REITs remained stable in November again. A lot of market participants think that some of these companies could be a takeover target by private equity firms as a lot of them are trading at large discounts to NAV. Some people hold the opinion that the potential decrease in capital values is overstated.
The same is true for retail REITs. Additionally, the mood is rather defensive than growth orientated as the exogenous shocks may trigger a selloff in property values, Therefore the focus is more on shoring up liquidity rather than exploiting investment opportunities. Capital access is highly dilutive on current share prices, while fresh borrowing comes at escalating interest rates.
Incoming economic data and figures will drive market developments in the coming months as the central banks will adjust the speed and magnitude of further rate hikes accordingly. The quantitative tightening by the major central banks is also a burden for markets. But as already mentioned the slower economic growth expectations may allow central banks to slow their path of rising interest rates. This will support equity markets to some extend. But adverse factors like high inflation and higher interest rates will be an obstacle in the coming months.
Our approach, which aims at long-term stable dividend payments, has already achieved a dividend yield of +6.47 percent (gross excluding withholding tax) so far this year and is 200 basis points above the yield of the Global REIT Index. So, our forecast of 4.0 to 5.0 percent for the full year 2022 is clearly exceeded. For more information about our “QSF-DeA Global REIT’s” fund, performance, opportunities and investment opportunities, please contact us or visit https://deacapitalregermany.eu/dea-global-reits-fonds/.
Your contact persons
Dr. Thorsten Schilling
Thorsten.Schilling@deacapital.com
+49 69 50602 6700
