Page 173 - Profiles's Unit Trusts & Collective Investments - September 2024

Fund Manager Interviews

Please comment on your investment year (July 2023 – June 2024) from a fund manager’s
point of view.
The second half of 2023 was a tough period for listed property, due to the co-influence of
various factors. Locally, high interest rates continued to take their toll on broad economic activity,
which was compounded by severe load-shedding and the unfolding logistics crisis. This
culminated in weak growth expectations, and further undermined South Africa’s fiscal position.
Local bonds weakened steadily, dragging the property sector with it. Globally, the outbreak of war
in the Middle East sent shockwaves through markets, although the impact has, thankfully, been
less than feared.
The last six weeks of 2023 saw a sharp rally in equities and listed property, thanks to
expectations about the pace of rate cuts in 2024. That made listed property the best local
performing asset class for SA investors.
The year 2024 started on an optimistic note as investors anticipated aggressive rate cuts from
central banks globally. By March, it was apparent that rate cutswould be delayed, which weighed
on the sector, as did the dearth of economic activity in SA ahead of the elections.
Post the elections, the mood has changed dramatically. The formation of the GNU has had a
positive impact on investor sentiment, the rand, and the prospects for higher GDP growth. In
addition, the absence of load-shedding has supported sentiment and reduced operating costs.
Listed property has responded positively to these dynamics. Since June 2024, the sector has
continued to rally, and now trades at the highest level since the pandemic.
Over the 12 months ending June 2024, the fund has delivered a return of 24.3%, slightly below
that of its benchmark index.
In terms of risk management, what methods or strategies are you able to use to protect your
clients’ investments?
Firstly, we are a long-only asset manager and therefore do not undertake short selling or
hedging within the portfolio. In terms of risk mitigation:
We are not benchmark huggers at all. We are nimble and not afraid to vary widely from the

benchmark to back our convictions.
We consider property to be a long-term building block in an income portfolio. This is due to

Property’s unique ability to escalate both income and capital over the longer period despite
medium to shorter-term bouts of volatility driven by sentiment or interest rate moves. Our
investment philosophy looks to protect this increasing stream with every lever available to us
whether it be shifting geographies (foreign versus local), portfolio (office vs retail vs
warehousing & logistics) or business model (large regional malls, township malls or unique
rental stream).
Our low expense ratio is specifically designed to make the income more meaningful and
sustainable, given that income is an important component of the total return.

Please comment on the year ahead and, if possible, estimate the performance of your fund
over 2 or 3 years. What are your targets and objectives for the year ahead?
Our investment philosophy is anchored around the importance of generating an income from
your investments, and for that income to grow from year to year. That is the framework against
which we build the portfolio. The portfolio has benefitted over the past 2 years from an exposure to
bonds, which has provided stability and security of income. Given that the rate cutting cycle is
imminent both locally and abroad, and supported by further positive change in SA, there is an
opportunity to reposition the portfolio to benefit from the combination of falling rates and
stronger local growth. Furthermore, if the rand strengthens further, as we believe it could, then the
emphasis will shift to locally-focussed funds over offshore-focussed funds.
What are your expectations for the property sector?
At the time of writing, the listed property sector has performed exceptionally well – with
year-to-date returns of close to 25% on a total return basis. That is exceptional, but very welcome
for patient investors who have endured the bear cycle.

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