Page 169 - Profile's Unit Trusts & Collective Investments - March 2025

Fund Manager Interviews

The global listed property sector (as measured by GPR 250 REIT Index) produced a positive
return of 1.6% in US dollar for the year to 31 December 2024. The rand weakened by 2.7% against
the dollar, meaning the rand return of the benchmark was +4.3% for year. The Merchant West SCI
Global Property Income underperformed its benchmark for the year and produced a positive return
of 1.6% in rands.

In terms of risk management, what methods or strategies are you able to use to protect your
clients’ investments?
We continue to favour investments in high-quality property companies that are expected to
withstand the impact of technological and economic disruptions. The fund is well diversified both
geographically and by property-type. We have in recent years focussed our investment research
and portfolio holdings to more developed markets. We believe we have a better understanding of
property fundamentals in these markets and that ESG (specifically governance) risks are lower,
and ESG compliance is of a higher standard. We select stocks on a bottom-up approach rather than
attempting to take significant geographical or sector bets. We implement internal limits on
individual holdings and sector weights to reduce any significant concentration risk in the portfolio.
We prefer REITs with established property portfolios that employ limited development
activities to support the organic growth of their property portfolios. These companies produce
more predictable and relatively stable rental income streams, from which regular dividends can be
paid to shareholders. We do not invest in property developers, which undertake significant
development and operational risks to generate profits and cash flows on property disposals.
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?
Global listed property companies have over the last two years experienced a uniquely negative
environment, which was characterised by a rapid increase in interest rates, higher bond yields and
slowing economic growth. All three factors negatively impacted property fundamentals, earnings,
and valuations, which resulted in global property underperforming global equities.
The US Federal Reserve (Fed), Bank of England (BoE) and European Central Bank (ECB) have
all indicated that inflation in their regions appears to be under control and have initiated interest
rate cutting cycles in their regions. They have also indicated that that they are willing to ease
monetary conditions further and reduce interest rates as inflation in their regions moves closer to
their 2% target ranges on a sustained level. This should lead to more business and consumer
spending, and an increase in economy activity, which should make for a more positive investment
environment for global listed property over the next two to three years. The fund is overweight
developed markets, where monetary policy has been more restrictive and therefore should benefit
more from an environment of lower interest rates and higher economic growth. We therefore
expect global listed property to produce US dollar returns in excess of its average long-term
average of +8% per annum over the next few years.
The fund aims to provide investors with a reasonable level of income, as well as long-term
income and capital growth. The fund aims to outperform the GPR 250 REIT Index in rand. The
fund is ideally suited for investors who:
Seek a diversified portfolio of global property stocks across developed markets and various
property types, some of which are not available in South Africa (ie, listed on JSE) for example
healthcare, data centres and mobile towers.
Seek to diversify away from the South African listed property market or compliment it with a
portfolio of sector-leading global property companies.
Seek to diversify their offshore cash, equities and/or bond exposure with a unique growth

asset class with low correlation benefits that will enhance their overall investment portfolio’s
risk-adjusted return profile.
What are your expectations for the property sector?
The global listed property sector should benefit from higher economic growth and lower
interest rates over the next few years. The sector should also benefit from a stabilisation in
unemployment levels and inflation, which will support higher consumption and spending by

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