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SICAV

Global Real Estate Securities Fund

Equity investment alert to the changing supply and demand dynamics of the global property market.

ISIN LU1028172655 WKN A1XD2X

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

5.78%
$11.4m

1YR Return
(View Total Returns)

Manager Tenure

12.14%
4yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

-0.38
3.34%

Inception Date 31-Jan-2014

Performance figures calculated in GBP

Other Literature

30-Nov-2019 - Nina Jones, Portfolio Manager,
We believe operating fundamentals are likely to remain reasonably solid for real estate companies. While there are pockets of over-building, generally the level of new supply across various property types has been in line with or below current demand. With continued increases in construction costs and land values, we expect development in some markets and property types to moderate. Demand drivers are multi-faceted and inherently more difficult to predict.
Nina P.  Jones
Nina P. Jones, Portfolio Manager

Nina Jones is the lead portfolio manager for the T. Rowe Price Global Real Estate Strategy and is chairman of its Investment Advisory Committee. She is a vice president and an Investment Advisory Committee member of the Global Growth Stock, Capital Appreciation, and Financial Services Strategies. Mrs. Jones is a vice president of T. Rowe Price Group, Inc.

Click for Manager Outlook
 

Strategy

Manager's Outlook

2019 has been a very strong year for real estate stocks. Solid rental growth combined with low and declining interest rates has resulted in double-digit absolute returns and outperformance relative to broader equity markets.�

Interest rates have fallen around the world, providing support and upward pressure on property prices. Real estate stocks have responded in kind, and in many cases are now trading slightly above the private market value of their underlying real estate. While we aren't expecting a sharp upward movement in rates, we believe further downward pressure is also unlikely. Thus, we believe returns going forward should be largely driven by operating fundamentals.�

As we look forward to 2020, we are encouraged that operating fundamentals are likely to remain reasonably solid for real estate companies. We continue to closely monitor the construction of new supply given the importance of supply/demand dynamics for the sector. While there are pockets of over-building, generally the level of new supply across various property types has been in line with or below current demand. With continued increases in construction costs and land values, we expect development pipelines in some markets and property types to moderate. Demand drivers are multi-faceted and inherently more difficult to predict. We are mindful of the macroeconomic challenges and increased political uncertainty investors face in the current environment but remain constructive on the stocks we own in the portfolio. We believe the well-located real estate in our portfolio will continue to attract above-average demand from tenants throughout the economic cycle.

With the goal of providing our clients sound and diversified real estate exposure, we remain purely focused on investing in commercial real estate companies whose value is derived from their underlying assets. Our philosophy is to own high-quality real estate in land-constrained markets, run by strong management teams, with well-capitalized balance sheets as we believe sustainable rent, cash flow, and dividend growth combined with good capital allocation is a recipe for producing solid risk-adjusted returns over the long run.�

Investment Objective

To increase the value of its shares in the long term through both growth in the value of, and income from, its investments. The fund invests mainly in a diversified portfolio of securities issued by real-estate related companies. The companies may be anywhere in the world, including emerging markets.

Investment Approach

  • Employ fundamental research with a bottom-up approach.
  • Assess the capability, strategy, and management of the business.
  • Evaluate the asset base potential.
  • Understand the supply and demand dynamics by property and market.
  • Analyze balance sheet strength and flexibility.
  • Integrate a risk-adjusted perspective throughout our analysis.
  • Establish whether we would want to own a business for the long term.
  • Leverage the deep knowledge base at T. Rowe Price, including dedicated analysts in North America, Europe, and Asia.

Portfolio Construction

  • Typically 40-80 securities
  • Invest in highest conviction ideas
  • Diversified by property type and geography, with at least 40% invested outside the U.S.
  • Sector weights are the result of bottom-up security selection
  • Country weightings +/- 10% of the benchmark
  • Individual position sizes range from +/- 5% of the benchmark
  • Continually monitor investments to ensure:
    • Execution and results are tracking our expectations
    • Strategy intact and investment thesis unfolding as expected

Performance (Class Q | GBP)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Since Manager Inception
Annualised
Fund % 12.14% 5.78% 8.36% 11.00% 6.53%
Indicative Benchmark % 13.00% 7.89% 9.65% 11.75% 8.12%
Excess Return % -0.86% -2.11% -1.29% -0.75% -1.59%

Inception Date 31-Jan-2014

Manager Inception Date 31-Mar-2015

Indicative Benchmark: FTSE EPRA Nareit Developed Index Net TRI

Data as of  30-Nov-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 17.94% 5.52% 11.32% 11.86%
Indicative Benchmark % 19.58% 7.48% 12.83% 12.83%
Excess Return % -1.64% -1.96% -1.51% -0.97%

Inception Date 31-Jan-2014

Indicative Benchmark: FTSE EPRA Nareit Developed Index Net TRI

Data as of  30-Sep-2019

Performance figures calculated in GBP

Recent Performance

  Month to DateData as of 13-Dec-2019 Quarter to DateData as of 13-Dec-2019 Year to DateData as of 13-Dec-2019 1 MonthData as of 30-Nov-2019 3 MonthsData as of 30-Nov-2019
Fund % -4.52% -7.00% 15.46% 0.27% -1.24%
Indicative Benchmark % -5.24% -8.60% 13.18% -1.18% -2.43%
Excess Return % 0.72% 1.60% 2.28% 1.45% 1.19%

Inception Date 31-Jan-2014

Indicative Benchmark: FTSE EPRA Nareit Developed Index Net TRI

Indicative Benchmark: FTSE EPRA Nareit Developed Index Net TRI

Performance figures calculated in GBP

Past performance is not a reliable indicator of future performance.  Source for fund performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures. 

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

Returns shown with reinvestment of dividends after the deduction of withholding taxes. 

Effective 1 June 2019, the "net" version of the indicative benchmark replaced the "gross" version of the indicative benchmark. The "net" version of the indicative benchmark assumes the reinvestment of dividends after the deduction of withholding taxes applicable to the country where the dividend is paid; as such, the returns of the new benchmark are more representative of the returns experienced by investors in foreign issuers. Historical benchmark performance has been restated accordingly.

30-Nov-2019 - Nina Jones, Portfolio Manager,
The real estate segment delivered negative results in November and lagged broader stock benchmarks as dividend-paying stocks came under pressure from rising bond yields. Within the portfolio, stock selection in the U.S. helped relative results due to the portfolio’s out-of-benchmark positions in hotel operator Hilton Worldwide and Rayonier, a timber REIT. Hilton Worldwide benefitted from easing concerns about a slowdown in global economic growth, while Rayonier performed well amid a strengthening outlook for the lumber industry and market optimism on the progress of trade talks. Stock selection in the UK also added value, led by our position in Unite Group, an owner of private student housing. Student housing companies have benefitted from new regulations that will allow international students to stay in the UK longer. However, our underweight in Sweden held back relative performance as the country was one of the top performers in the index. Stock selection in Canada also weighed on returns as our position in Allied Properties REIT, a developer of office buildings and mixed-use properties, recorded negative results.

Holdings

Total
Holdings
65
Largest Holding Prologis 5.85% Was (30-Jun-2019) 5.80%
Other View Full Holdings Quarterly data as of 30-Sep-2019
Top 10 Holdings 31.44% View Top 10 Holdings Monthly data as of 30-Nov-2019

Largest Top Contributor^

Prologis
By 1.36%
% of fund 5.77%

Largest Top Detractor^

Sun Hung Kai Properties
By -0.93%
% of fund 2.82%

^Absolute

Quarterly Data as of 30-Sep-2019

Top Purchase

Equity LifeStyle Properties (N)
1.20%
Was (30-Jun-2019) 0.00%

Top Sale

Scentre (E)
0.00%
Was (30-Jun-2019) 1.51%

Quarterly Data as of 30-Sep-2019

30-Sep-2019 - Nina Jones, Portfolio Manager,

We invest primarily in developed markets and seek to have broad geographic exposure while avoiding large country bets. We are diversified across property types; although, given our bottom-up approach, we may be overweight or underweight particular subsectors at any given time. We believe that high-quality assets in high-barrier-to-entry markets run by skilled management teams drive superior performance within the real estate space over the long term. Because real estate cycles occur over long periods, we employ a long-term orientation to allow for the compounding of value for our clients. We believe that fundamental research is the key to identifying attractive long-term risk/reward opportunities.

United States

The largest absolute weight in the portfolio and benchmark is in the United States, the largest and most mature market within commercial real estate. In the U.S., leasing pipelines remain active, and occupancy rates and rents are increasing in many markets across a range of property types. We believe that commercial real estate should benefit from reasonable levels of new supply in conjunction with moderate demand growth. We hold a diverse range of U.S. commercial real estate companies, including a large allocation in Prologis, an industrial property landlord with significant global scale. We believe that the company is well positioned to benefit from supply-chain reconfiguration and growth in e-commerce.

We also have large allocations in apartment REITs AvalonBay Communities and Equity Residential. AvalonBay Communities is a leading apartment REIT with an excellent development track record and assets located in communities with solid demand trends. Equity Residential is the largest publicly traded apartment REIT in the U.S. The company's holdings have evolved into a portfolio of high-quality, bicoastal assets with an urban focus.

During the quarter, we initiated a position in Equity LifeStyle Properties, an owner of manufactured home communities. We believe the company's fundamentals are solid, and it should continue to benefit from demand for affordable housing.

Japan

We have a significant weighting in Japan, where we believe our holdings are well positioned to benefit from economic recovery and a reversal of deflationary pressures. Our largest holding is Nippon Accommodations Fund, which invests mainly in apartments in the Tokyo area. We believe it has the best portfolio among residential J-REITs. We also have a sizable position in Mitsubishi Estate, the largest real estate developer and landlord in Japan, which owns a substantial concentration of assets in the Marunouchi district adjacent to the Imperial Palace.

During the quarter, we initiated a position in Mori Hills REIT, which primarily invests in high-quality office buildings in prime Tokyo locations. Mori Hills offers a relatively high�dividend yield�and attractive defensive qualities compared with other office J-REITs. We also reduced our position in Mitsui Fudosan, which develops and owns numerous office, housing, and retail properties, primarily in Tokyo. While we believe the company's development pipeline should drive cash flow growth over the next few years, we see few catalysts that would support stock appreciation in the near term.

Hong Kong

We maintain a substantial weighting in Hong Kong, where we focus on companies with high-quality properties in attractive locations. The lack of available land for commercial and residential construction should benefit operating fundamentals over the long run. We have been closely analyzing the impact of recent demonstrations on Hong Kong real estate companies, and we will continue to use our research capabilities to find the best long-term investment opportunities.

Our largest exposure is to Sun Hung Kai Properties, one of the largest-cap real estate companies in the world with rental properties and residential developments in Hong Kong and mainland China. We added to luxury mall operator Hang Lung Properties during the period, based on an improving outlook for luxury sales on the Chinese mainland. The company's Hong Kong mall operations, with mostly fixed rents and lower exposure to tourism, also offer attractive defensive characteristics in the near term. We reduced our position in Hongkong Land Holdings, which owns prime commercial properties in the central business district of Hong Kong, as the upcycle in Hong Kong office space appears to have moved into its later stages.

United Kingdom

We also maintain a significant weighting to the United Kingdom. We believe London will remain an attractive global city for companies and employees alike. Our largest exposure is to Derwent London, which redevelops office assets in the West End and Tech Belt markets. We also hold positions in Great Portland Estates, which redevelops office assets in the supply-constrained West End; student housing developer Unite Group; and Shaftesbury, which owns a highly concentrated mixed-use portfolio in London's West End.

Additional Allocations

We maintain notable exposures to Australia and Singapore, and Germany represents our largest position in Continental Europe, although we remain underweight relative to the benchmark.

  • In Australia, our largest exposure is to Goodman Group, which develops and owns industrial warehouses. We initiated a position in Dexus, the country's largest owner/manager of office properties, during the quarter based on our view that the company will benefit from above-trend rent growth and lower vacancy rates in Sydney over the next few years. We eliminated our holding in shopping center owner Scentre. We like the company's long-term prospects but believe it could face near-term challenges from consumer weakness and concerns regarding e-commerce.
  • In Singapore, our largest position is in Capitaland Mall Trust, which is focused on suburban malls.
  • Deutsche Wohnen, which maintains a portfolio of Berlin-focused residential and healthcare properties, was our largest purchase in Germany during the quarter. We believe the sell-off in the company's shares after the passage of a rent freeze in Berlin reflected an overly bearish market outlook, and we initiated a position at an attractive valuation.

Industry

Total
Industries
10
Largest Industry Apartment Residential 23.23% Was (31-Oct-2019) 23.87%
Other View complete Industry Diversification

Monthly Data as of 30-Nov-2019

Indicative Benchmark: FTSE EPRA Nareit Developed Index

Top Contributor^

Industrial
Net Contribution 0.41%
Industry
0.01%
Selection 0.40%

Top Detractor^

Healthcare
Net Contribution -0.33%
Industry
-0.22%
Selection
-0.11%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Office
By7.02%
Fund 20.26%
Indicative Benchmark 13.24%

Largest Underweight

Diversified
By-6.20%
Fund 13.15%
Indicative Benchmark 19.35%

Monthly Data as of 30-Nov-2019

Regions

Total
Regions
5
Largest Region North America 55.77% Was (31-Oct-2019) 55.54%
Other View complete Region Diversification

Monthly Data as of 30-Nov-2019

Indicative Benchmark: FTSE EPRA Nareit Developed Index

Largest Overweight

Latin America
By0.50%
Fund 0.50%
Indicative Benchmark 0.00%

Largest Underweight

North America
By-2.56%
Fund 55.77%
Indicative Benchmark 58.33%

Monthly Data as of 30-Nov-2019

Countries

Total
Countries
17
Largest Country United States 53.60% Was (31-Oct-2019) 53.47%
Other View complete Country Diversification

Monthly Data as of 30-Nov-2019

Indicative Benchmark: FTSE EPRA Nareit Developed Index

Largest Overweight

Finland
By1.60%
Fund 1.74%
Indicative Benchmark 0.13%

Largest Underweight

Germany
By-2.30%
Fund 2.02%
Indicative Benchmark 4.33%

Monthly Data as of 30-Nov-2019

30-Nov-2019 - Nina Jones, Portfolio Manager,
The U.S. remains the dominant country allocation within the portfolio at over 50%. Japan, Hong Kong, the UK, and Australia represent a significant portion of the equity allocation as well. In Singapore, we reduced our holdings in a retail mall owner after it indicated it might buy assets in Europe or Australia and purchased shares of an industrial REIT that owns factories and business parks. We also added to a Japanese property developer as we like its top-tier leasing portfolio. In Germany, we eliminated our position in a Berlin residential property company after losing confidence in the new management team.

Team (As of 31-Aug-2019)

Nina P.  Jones

Nina Jones is the lead portfolio manager for the T. Rowe Price Global Real Estate Strategy and is chairman of its Investment Advisory Committee. She is a vice president and an Investment Advisory Committee member of the Global Growth Stock, Capital Appreciation, and Financial Services Strategies. Mrs. Jones is a vice president of T. Rowe Price Group, Inc.

Mrs. Jones has 11 years of investment experience, all of which have been with T. Rowe Price. She joined the firm in 2008 after serving as a summer intern in 2007, covering payroll processor companies. Prior to joining the firm, she was a senior associate in audit and risk advisory for KPMG LLP.

Mrs. Jones earned a dual B.S., magna cum laude, in accounting and finance from the University of Maryland and earned an M.B.A., with honors, in finance and economics from Columbia Business School. She is a certified public accountant.

  • Fund manager
    since
    2015
  • Years at
    T. Rowe Price
    11
  • Years investment
    experience
    11
Jai Kapadia

Jai Kapadia is a regional portfolio manager at T. Rowe Price. He manages the Global Real Estate Strategy and is responsible for stock selection for the Asia-Pacific region. 

Mr. Kapadia has 13 years of investment experience, eight of which have been with T. Rowe Price.  He joined the firm in 2011. Before his current role, Mr. Kapadia was an analyst and associate director of research in the Equity Research Group of T. Rowe Price in Hong Kong, covering Asian conglomerates, real estate and Indian pharmaceuticals. Prior to joining the firm, he worked at Credit Suisse in New York, covering telecommunication equipment stocks, and at Sirios Capital in Boston, covering consumer stocks. 

Mr. Kapadia earned a B.A. in economics from Columbia University and an M.B.A. from the Massachusetts Institute of Technology, Sloan School of Management.

  • Fund manager
    since
    2019
  • Years at
    T. Rowe Price
    8
  • Years investment
    experience
    13
Caleb N. Fritz, CFA

Caleb Fritz is a portfolio specialist in the U.S. Equity Division of T. Rowe Price. He acts as a proxy for equity portfolio managers with institutional clients, consultants, and prospects. Mr. Fritz supports T. Rowe Price's large-cap value strategies. He is a vice president of T. Rowe Price Group, Inc.

Mr. Fritz has 19 years of investment experience, 12 of which have been with T. Rowe Price. Prior to his current position, he was a lead portfolio analyst providing analytical support to investment, client service, and marketing staff for the firm's large-cap value and health sciences portfolios. Prior to joining the firm in 2007, Mr. Fritz served as an associate analyst for Legg Mason Capital Management, covering the health care sector.

Mr. Fritz earned a B.A. and an M.A. from the University of South Florida, and he also has earned the Chartered Financial Analyst designation.

  • Years at
    T. Rowe Price
    12
  • Years investment
    experience
    19

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount Minimum Subsequent Investment Minimum Redemption Amount Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $15,000 $100 $100 5.00% 160 basis points 1.77%
Class I $2,500,000 $100,000 $0 0.00% 75 basis points 0.85%
Class Q $15,000 $100 $100 0.00% 75 basis points 0.92%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.

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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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