Fairtree Global Listed Real Estate Fund Q2 2026 commentary
The second quarter ended with the Fund up 7.15% in absolute terms, while the index gained 8.52%, resulting in 140bps of relative underperformance. The underperformance was mostly driven by the first and second bites of the apple, regional and sector allocation, which detracted from performance by 172 bps. The third bite of the apple, stock selection, increased performance by 22 bps. We held around 6% cash this quarter, which contributed 13 bps to performance. The Developed Property Index underperformed the S&P 500 and the Mag 7, which were up 15% and 12%, respectively. During the quarter, we saw oil prices increase due to the US-Iran conflict, which resulted in higher inflation and increases in interest rates in some regions. We reduced our US underweight to adapt to the new environment.
Regional performance for the quarter was led by the UK, up 16%, where we are overweight. We have since reduced our overweight by taking profits on Segro after the share price pop post the offer from Prologis. Australia was in second place, up 14%. We were underweight due to high inflation and interest rate hikes, but have more recently moved to neutral as inflation has receded and interest rate hikes are likely drawing to a close. The US was the third-best performer, up 11%, and we have reduced our underweight as strong macro data continues. The Asian developers were the weakest performers, down 11%, 10% and 3% in Hong Kong, Japan and Singapore, respectively. In Hong Kong, we are overweight given improving fundamentals and attractive valuations. In Japan, we are underweight as interest rates rise and valuations are less attractive. In Singapore, we remain underweight due to a lack of attractively valued bottom-up ideas. Our most overweight region was the EU, with flat performance for the quarter as the ECB increased interest rates, but we remain positive on the fundamentals of the stocks we hold.
The top performing stock in our portfolio for Q2 was UK industrial stock Segro, which was up 36% after Prologis put in an offer to acquire the company, which Segro later rejected, and we have since exited this position. US healthcare stock Healthpeak Properties was the second best, up 32%, which we also exited during the quarter. US office stock BXP was the third best, up 29%, as fundamentals improved. The weakest performing stocks were all in Asia. Hong Kong’s New World Development was down 22%, followed by Hang Lung Properties, down 18%. Japanese developer Mitsui Fudosan was third, down 12%, which we only added to the Fund this quarter after most of the weakness was already priced in.
The first half of the year ended with good performance for real estate as transaction volumes increased, share buybacks picked up, and momentum in the US was evident. We are now assessing the Asian markets for value opportunities after reviewing the US, EU and UK during Q2. We look forward to the second half of the year as we expect more IPOs, mergers and acquisitions to come to fruition. We remain focused on quality management and assets, solid fundamentals and healthy balance sheets.
*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 30 June 2026). The fund has returned an annualised return of 4.37% since inception (April 2020) (benchmark annualised return of 7.76% since inception). The fund’s annualised performance over 1 year is 8.48% (Benchmark: 13.26%). The fund’s annualised performance over 3 years is 5.78% (Benchmark: 9.60%). 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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