Schroder ISF* Global Cities Real Estate
Schroder ISF Global Cities Real Estate
The Schroders Global Cities approach is unique. This is because the team invests by first understanding where a company owns real estate. Their philosophy is that the rents of a company should increase faster the closer to the point of consumption the properties are. This means they have pricing power. This means, the larger and wealthier a population in a city is, the more rent a property owner can charge. This, in the long-term, should be beneficial to an investor.
5 reasons to invest
1. 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:
- A large lump sum of capital is required to purchase
- A lack of diversification (tenant and geographic risk)
- High transaction and management costs.
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.
2. Gain exposure to commercial real estate from global cities
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.
3. Access cutting-edge data insights on global cities
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.
4. 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.
5. Benefit from real estate exposure across multiple channels
Meet the managers
Co-head of Global Real Estate Securities
- BA Hons in Politics from University of Newcastle Upon Tyne
- Graduate Diploma in Real Estate from London South Bank University
- Fully qualified Chartered Surveyor and a member of the Royal Institution of Chartered Surveyors.
Co-Head of Global Real Estate Securities
- BA Hons in English Literature from Durham University
- MSc in Real Estate Finance and Investment from Reading University
- Diploma in Cross Border Valuation from Oxford Said Business School.
What are the risks?
- China country risk: Changes in China's political, legal, economic or tax policies could cause losses or higher costs for the fund.
- Counterparty risk: The counterparty to a derivative or other contractual agreement or synthetic financial product could become unable to honour its commitments to the fund, potentially creating a partial or total loss for the fund.
- Currency risk: The fund can be exposed to different currencies. Changes in foreign exchange rates could create losses.
- Derivatives risk: A derivative may not perform as expected, and may create losses greater than the cost of the derivative.
- Equity risk: Equity prices fluctuate daily, based on many factors including general, economic, industry or company news.
- Leverage risk: The fund uses derivatives for leverage, which makes it more sensitive to certain market or interest rate movements and may cause above-average volatility and risk of loss.
- 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: Failures at service providers could lead to disruptions of fund operations or losses.
- Capital risk / distribution policy: the expenses of this share class are paid out of capital rather than out of investment income. Capital growth will be reduced and in periods of low growth capital erosion may occur.
Discrete yearly performance
Schroder ISF Global Cities Real Estate C Acc
Q2 2017 - Q2 2018
Q2 2016 - Q2 2017
Q2 2015 - Q2 2016
Q2 2014 - Q2 2015
Q2 2013 - Q2 2014
Discrete yearly performance
Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.
Source: FE Analytics, bid to bid with net income reinvested to 30 June 2018, C Acc NAV share class, net of fees in USD.