Schroder ISF Global Cities Real Estate
Global Cities are places where people want to live, work and play. Their key characteristics are: strong infrastructure; diverse economies; skilled labour force; and quality of life and culture. Investing in real estate within these cities gives exposure to a diverse range of sectors and access to economies that are expected to outperform national averages.
Easy access to property
Real estate companies are listed on stock exchanges, meaning they’re tradeable securities – a partial share in the underlying properties.
Owning property directly has limitations:
And while the shares of real estate companies can move up and down on a day-to-day basis, their returns look similar to directly-invested real estate over the long-term.
Exposure to commercial real estate
Going global can help provide diversification away from owning only property in one country.
Risk is spread across a number of properties and companies, rather than relying on the success of one or two. Global Cities’ investments rely on identifying the best operators in locations where the economic demand is greatest. This results in higher rents, the bedrock of real estate investing.
The team believes these cities are the real estate ‘winners’ of tomorrow as they could be home to the most in-demand real estate.
Access cutting-edge data insights
Data is at the heart of the index and the team use data to give them an active edge.
This approach is unique in listed real estate investing and is the foundation of the Global Cities' approach.
The team has a database and can identify the location of all the assets held in the portfolio. This means each company held has a Global Cities score: the higher the score the more likely a company is to be in the portfolio.
Capture urbanisation trends
Urbanisation will, in the team’s view, be one of the most important investment themes of the next 10 years. Global Cities sits at the centre of this theme.
Economic activity is centred in cities. Picking the cities that will gain greater share of the global economy will underpin the demand for the assets the team invests in. This long-term approach is crucial when investing in Global Cities.
The scale and diversity of the strongest Global Cities, means the team can invest in different real estate sectors, such as data centres, self-storage and manufactured homes. This is in addition to the more conventional real estate sectors such as offices, retail and industrial.
Choice means the team can gain exposure to pockets of demand both in a sub-sector and a city, without incurring the challenge of liquidity and transaction costs of a direct real estate fund.
Benefit from exposure across multiple-channels
Schroders Global Cities invests in real estate companies across:
Currency risk: The fund may lose value as a result of movements in foreign exchange rates.
Currency risk / hedged share class: The hedging of the share class may not be fully effective and residual currency exposure may remain. The cost associated with hedging may impact performance and potential gains may be more limited than for unhedged share classes.
Derivatives risk – efficient portfolio management: Derivatives may be used to manage the portfolio efficiently. A derivative may not perform as expected, may create losses greater than the cost of the derivative and may result in losses to the fund.
Emerging Markets & Frontier risk: Emerging markets, and especially frontier markets, generally carry greater political, legal, counterparty, operational and liquidity risk than developed markets.
IBOR Risk: The transition of the financial markets away from the use of interbank offered rates (IBORs) to alternative reference rates may impact the valuation of certain holdings and disrupt liquidity in certain instruments. This may impact the investment performance of the fund.
Liquidity risk: In difficult market conditions, the fund may not be able to sell a security for full value or at all. This could affect performance and could cause the fund to defer or suspend redemptions of its shares.
Operational risk: Operational processes, including those related to the safekeeping of assets, may fail. This may result in losses to the fund.
Performance risk: Investment objectives express an intended result but there is no guarantee that such a result will be achieved. Depending on market conditions and the macro economic environment, investment objectives may become more difficult to achieve.
Real Estate and Property Risk: Real estate investments are subject to a variety of risk conditions such as economic conditions, changes in laws (e.g. environmental and zoning) and other influences on the market.
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