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The funds most exposed to UK property stocks

And the impact as share prices fall.

Locally-listed UK real estate investment trusts (Reits) have come under pressure on the JSE in the past few weeks. A weakening pound, concerns around Brexit and operational issues have weighed on the three biggest counters – Intu, Hammerson and Capital & Counties.

Intu has been the worst affected, with its shares falling over 42% in just the last two weeks after releasing its half-year numbers on July 31. The company reported lower net rental income, and a sharp drop in cash flows from operating activities.

It also announced that it would be disposing of its underperforming assets in Spain to reduce its debt and suspended its dividend to retain cash in the business. This saw the counter fall 30% in one day.

A day earlier, Hammerson had reported a 12.3% drop in rental income in its interim results. It was unable to increase its dividend over 2018 as it too noted that it had to prioritise paying off debt.

Capital & Counties delivered results a few days earlier that were more robust than its peers, but it too has been unable to escape the malaise. The counter is down more than 10% over the past 30 days.

Performance of UK Reits
Counter 30-day return
Intu -49.4%
Hammerson -22.8%
Capital & Counties -11.8%

Source: ProfileData

This has naturally impacted funds with large holdings in these shares. Some managers had built up large positions in these Reits because their valuations were looking attractive. However, the difficult UK environment has continued to push their prices lower.

These counters were not, however, that widely held. As they all have primary listings in London, none of them are in the FTSE/JSE SA Listed Property Index (SAPY), which is the most widely used local listed property benchmark.

According to the latest available figures from Morningstar, Intu is held by 158 unit trusts, exchange-traded funds (ETFs) and institutional portfolios. The share however makes up more than 1% of only 26 of these funds.

Funds exposed to UK Reits
Counter Total number of funds Funds with greater than 1%
Intu 158 26
Hammerson 167 31
Capital & Counties 219 45

Source: Morningstar

One would expect these counters to be reasonably widely held in specialist property unit trusts. However, a number of funds with large exposures are either equity or multi-asset portfolios.

The tables below show the 15 unit trusts and ETFs with the largest exposures to each of the three counters.

Funds most exposed to Intu
Fund Portfolio weight
Oasis Property Equity Fund 9.79%
NewFunds S&P GIVI SA Financial 15 ETF 6.69%
Long Beach Flexible Prescient Fund 6.56%
Satrix Property ETF 4.17%
Investec Value Fund 3.49%
Stanlib Capped Property Index Tracker Fund 2.41%
Investec Property Equity Fund 2.21%
Aeon General Equity Fund 2.14%
Alexander Forbes Investments Equity FoF 2.03%
Coronation Market Plus Fund 1.88%
Integre Large Cap Prescient Fund 1.87%
Investec Emerging Companies Fund 1.3%
Catalyst SA Property Equity Prescient Fund 1.28%
Satrix Mid Cap Index Fund 1.26%
Sasfin BCI Opportunity Equity Fund 1.21%

Source: Morningstar

Funds most exposed to Hammerson
Fund Portfolio weight
Oasis Property Equity Fund 5.88%
Investec Property Equity Fund 5.56%
Discovery Flexible Property Fund 4.55%
Catalyst Flexible Property Prescient Fund 4.32%
Old Mutual SA Quoted Property Fund 3.54%
MSM Property ACI Fund 3.17%
Imalivest SCI Balanced Fund 3.03%
Plexus Wealth BCI Property Fund 2.89%
Stanlib Property Income Fund 2.63%
SIS Property Equity Fund 2.48%
Catalyst SA Property Equity Prescient Fund 2.43%
Ashburton Multi-Manager Property Fund 2.16%
Satrix Property ETF 2.04%
CoreShares Scientific Beta Multi-Factor Index Fund 2.04%
Stanlib Multi-Manager Property Fund 1.85%

Source: Morningstar

Funds most exposed to Capital & Counties
Fund Portfolio weight
Long Beach Managed Prescient Fund 10.26%
Long Beach Flexible Prescient Fund 9.85%
Oasis Property Equity Fund 8.41%
Foord Absolute Return Fund 5.43%
Investec Property Equity Fund 4.35%
Nedgroup Investments Value Fund 4.23%
Satrix Property ETF 4.21%
Foord Equity Fund 4.13%
Catalyst SA Property Equity Prescient Fund 4.05%
Coronation Property Equity Fund 3.94%
NewFunds S&P GIVI SA Financial 15 ETF 3.61%
Stanlib Capped Property Index Tracker Fund 3.44%
Sasfin BCI Equity Fund 3.32%
Citadel SA Property H4 Fund 3.25%
Absa Smart Alpha Property Fund 2.74%

Source: Morningstar

It’s noticeable that a few funds are heavily exposed to more than one of these stocks. Some hold all three. This has materially hurt their short-term performance.

The table below shows the funds that have large holdings in these UK Reits, together with their three-month performance figures.

Funds heavily exposed to UK Reits
Fund 3-month return
NewFunds S&P GIVI SA Financial 15 ETF -14.54%
Oasis Property Equity Fund -10.76%
Investec Property Equity Fund -8.2%
Satrix Property ETF -7.33%
Stanlib Capped Property Index Tracker Fund -6.98%
Catalyst SA Property Equity Prescient Fund -5.97%
Long Beach Flexible Prescient Fund -3.66%

Source: ProfileData

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SA listed property is due a big haircut. Valuations are one or more of:
naive,
misguided,
incompetent,
dishonest.

Depending on the unit trust, they already had a haircut of 33-49%.

Bit off-topic, but when viewing the image of Eldon Square in the UK, a certain degree of envy fills me (as a South African):

How the heck to the Brits manage to keep the pavement/walkways so pristine clean?
The road’s curb/edge….not a broken or misplaced curbstone to be seen!
The double yellow-lines seems like fresh paint!
The road-surface so smooth…I recon shock-absorber & suspension-component businesses must be few and far between.

And yet we complain about the effects Brexit! 😉 Get me OUT of THIS Azanian hole…now! ANC, please deport me to “Brexit hell”.

Haha! I have been saying the same thing to my friends in the UK. It doesn’t help that I say that to them. Perceived risk is so dependent on the circumstances that you’ve become used to. I would be sleeping like a baby if I was in the UK – deal or no deal, the UK will, 100% be okay.

Precisely!
Here you are fed the “fear” of brexit.. typical mass media paid for hype IMO

yet here in SA reality is people are about to losing everything to gov, no comp!

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