Fairtree Global Listed Real Estate Fund Q4 2025 commentary
The fourth quarter ended with the Fund underperforming the benchmark by 313bps as it decreased by 386bps, while the benchmark decreased by 73bps. This was entirely driven by the third bite of the apple, stock selection, which decreased performance by 467bps, while the first and second bites of the apple, region and sector allocation, increased performance by 178bps. We held an average of 6% cash during the quarter, which had a negative 24bps effect on performance. The quarter was challenging for developed real estate as interest rates did not fall as expected, and economic data disappointed. Developed property underperformed global equities during the quarter, and after several years of underperformance, property stocks look relatively attractive, valued at 2.5x the dividend yield of the overall market.
Regional performance for the quarter was led by Asian markets. The top-performing region for the quarter was Singapore, with the developers up 8% and the REITs up 3%. We are neutral on Singapore as stellar performance in 2025 has led to full valuations, but they continue to benefit from low interest rates and a resilient economy. Japan was in second place, with the developers up 6% and the REITs flat. Hong Kong developers were the third top performer, up 5%, which is our largest overweight position. The UK was fourth, up 4%, which is our second-largest overweight position, given attractive valuations and likely gradual rate cuts. The weakest-performing sub-sector was Hong Kong REITs, down 8%, where we have no exposure. The second weakest performer was Australia, down 3%, where we acquired Goodman during the quarter, but remained underweight as valuations are less favourable and interest rates are unlikely to be cut further. The US was the third weakest, down 3%, where we remain significantly underweight.
US sector performance for the quarter was led by industrials, up 9%, where we were neutral as attractive valuations were offset by tariff uncertainty. The latter ultimately had a limited impact, and therefore, the sector was rerated higher. Lodging was in second place, up 3%, where we have no exposure given weak fundamentals. Healthcare was in third place, up 1%, where we were underweight due to stretched valuations. The weakest-performing sector was office, down 14%, where we have no exposure, as demand is weak and vacancy rates are high. Storage was the second weakest performer, down 9%, where we remain underweight as occupancies continue to fall. Data centres were the third weakest, down 6%, where we were underweight as non-property companies flood the space with supply. We were most overweight in shopping centres, which were down 2%, as we prefer them over malls, where valuations are stretched.
The top-performing stock in our portfolio in the fourth quarter was Australian storage REIT National Storage, up 20%, as an offer was made for the company. Second was Singapore developer City Developments, up 16%, although we have since closed this position as valuations started to look stretched after stellar performance in 2025. Third was US industrial stock Prologis, up 12%, as fundamentals improved and data centre news flow was favourable. The worst-performing stock for the quarter was US life sciences stock Alexandria, down 40%, after cutting dividends and announcing a weaker outlook than previously reported during its results announcement. The second weakest was UK student housing stock Unite, down 22%, after fewer student registrations resulted in weaker-than-expected demand. The third weakest was US medical office stock Healthpeak, down 15%, as the sector underperformed on weaker-than-expected take-up.
The year concluded with better relative performance for the Fund in December, given our preference for Asia over the US. We maintain this preference as we enter 2026, and prefer the EU and the UK over the US too. We remain relatively optimistic on global REITs versus the overall equity markets in 2026, given the large discount they are currently trading at, and with interest rates likely to fall further in 2026. We wish you all the best for 2026.
*Commentary is based on USD returns, net of investment charges, as at the close of US markets (16h00 EST) on the last trading day of the month. This may differ from ZAR returns, which are shown net of investment charges, as at 15h00 CAT on the last trading day of the month.
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Disclaimer
Fairtree Asset Management (Pty) Ltd is an authorised financial services provider (FSP 25917). Collective Investment Schemes in Securities (CIS) should be considered as medium to long-term investments. The value may go up as well as down and past performance is not necessarily a guide to future performance. CISs are traded at the ruling price and can engage in scrip lending and borrowing.
A schedule of fees, charges and maximum commissions is available on request from the Manager. A CIS may be closed to new investors in order for it to be managed more efficiently in accordance with its mandate. Performance has been calculated using net NAV to NAV numbers with income reinvested. The performance for each period shown reflects the return for investors who have been fully invested for that period. Individual investor performance may differ as a result of initial fees, the actual investment date, the date of reinvestments and dividend withholding tax. Full performance calculations are available from the manager on request. There is no guarantee in respect of capital or returns in a portfolio. Prescient Management Company (RF) (Pty) Ltd is registered and approved under the Collective Investment Schemes Control Act (No.45 of 2002). For any additional information such as fund prices, fees, brochures, minimum disclosure documents and application forms please go to www.fairtree.com.
Highest rolling one-year return 35.23% (Benchmark: 42.12%) and lowest rolling one-year return -26.73% (Benchmark: -25.09%) (information to 31 December 2025). The fund has returned an annualised return of 3.39% since inception (April 2020) (benchmark annualised return of 6.72% since inception). The fund’s annualised performance over 1-year is 4.68% (Benchmark: 9.58%). The fund’s annualised performance over 3-years is 3.48% (Benchmark: 6.65%). Fund returns disclosed are annualised returns net of investment management fees and performance fees. Annualised return is weighted average compound growth rate over the period measured. Fund investment risk indicator level: aggressive. Full performance calculations are available from the manager on request. Annualised performance: Annualised performance shows longer term performance rescaled to a 1-year period. Annualised performance is the average return per year over the period. Actual annual figures are available to the investor on request. Highest & Lowest return: The highest and lowest returns for any 1 year over the period since inception have been shown. NAV: The net asset value represents the assets of a Fund less its liabilities.
This document is confidential and issued for the information of the addressee and clients of Fairtree Asset Management only. It is subject to copyright and may not be reproduced in whole or in part without the written permission of Fairtree Asset Management. The information, opinions and recommendations contained herein are and must be construed solely as statements of opinion and not statements of fact. No warranty expressed or implied, as to the accuracy, timeliness, completeness, fitness for any particular purpose of any such recommendation or information is given or made by the Manager in any form or manner whatsoever. Each recommendation or opinion must be weighed solely as one factor in any investment or other decision made by or on behalf of any user of the information contained herein, and such user must accordingly make its own study and evaluation of each strategy/security that it may consider purchasing, holding or selling and should appoint its own investment or financial or other advisers to assist the user in reaching any decision. The Manager will accept no responsibility of whatsoever nature in respect of the use of any statement, opinion, recommendation, or information contained in this document. This document is for information purposes only and does not constitute advice or a solicitation for funds.
The Fairtree Global Listed Real Estate Fund is registered and approved under sections 65 of the Collective Investment Schemes Control Act 45 of 2002.
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