Fund overview
Despite negative returns, the fund outperformed the benchmark by almost 2% for the quarter delivering -8.05% returns versus the benchmark’s -9.90% in ZAR for the quarter. The rand strengthening against the dollar added to the negative ZAR returns. Our underweight position to the US as well as our overweight position to Europe were our biggest contributors to performance. From a stock selection perspective, we benefitted from our overweight positions in German residential property stocks - Deutsche Wohnen and Vonovia - and Japanese stocks – Japan Prime, Nippon Building Fund and Japan Retail Fund as well as Merlin Properties from Spain. We were hurt by some of our overweight positions in mall REITs such as Simon Property Group, General Growth Properties and Taubman Centers.

Market overview
Japan was the best performing market with over 8% returns whereas the US was the worst performing market with share prices declining by over 8%. There was further corporate activity in the retail property markets. In the UK, while Hammerson was been busy working on taking over fellow UK-based Intu, Klepierre, a French based mall owner came up with an offer for Hammerson at 41% above its previous day’s closing price. Klepierre has no intentions to take over the Intu. Hammerson’s board declined the offer and the talks are on-going. In the US, Brookfield Property Partners and General Growth Properties (GGP) finally agreed on a deal in which Brookfield will purchase all GPP shares that it does not own already. The price, however, did not please the market and given this, other US mall REITs’ share prices did not respond positively expected. We have reduced our UK exposure from overweight to neutral given the ongoing Brexit issues. The UK stocks that we hold focus on defensive London office plays alongside industrial/logistics stocks. We are keeping our European overweight position, mainly driven by the strong German residential sector. We have trimmed our US underweight position as relative valuations are starting to look better. We are more or less neutral on Australia, Japan, Singapore and Hong Kong.

Outlook
Global listed property is trading at a discount of about 7% to net asset value and is offering a one- year forward yield of 4.7% assuming 5.2% earnings growth. Markets are forecasting more Fed interest rate in 2018. This, together with global trade wars and geopolitical tensions could continue to cause some volatility in the short term. However, property fundamentals remain good in general and are backed by positive economic growth prospects.