Compelling long-term performance of global real estate securitiesGillian Tiltman, fund manager of the M&G Global Real Estate Securities Fund talks about the historical outperformance of global real estate securities and provides detailed insights into the fund's investment process and strategy. Managers | 08.02.2013 11:15 Uhr
Gillian Tiltman: Officially I took over the responsibility for the fund in 2010, however I have been responsible for all stock selection decisions since the fund’s launch in April 2008.
e-fundresearch.com: What is the current size of the fund?
Gillian Tiltman: 98 Million Euros (31.12.2012)
e-fundresearch.com: Do you also manage other funds or mandates?
Gillian Tiltman: No.
e-fundresearch.com: How long have you been in the business as a fund manager?
Gillian Tiltman: Since joining M&G in 2008. Prior to that I worked in municipal bonds (housing) investment banking.
e-fundresearch.com: What are the main steps in your investment process and in which area is your competitive edge to add value to investors?
Gillian Tiltman: The M&G Global Real Estate Securities Fund aims to maximise long term total return, consisting of income and capital appreciation, through investment, on a global basis, mainly in both real estate investment trusts (REITs) and other types of property companies.
The long-term performance of global real estate securities is compelling. Global real estate securities have significantly outperformed versus cash, equities, and bonds since December 1999, with only a short period of weakness during the financial crisis in 2008-2009. In addition, investors can benefit from a stable income stream of cash flows generated from real assets as well as their ability to help mitigate the negative effects of inflation.
Investing in the shares of property companies around the world requires enormous expertise. This is where a large asset management house, such as M&G, with extensive resources across both equities and property investing, and in risk management, can provide an edge in the running of a global portfolio. The M&G Global Real Estate Securities Fund benefits from M&G’s extensive resources across both equities and property investing. Having eight years of property investing experience myself, I work closely with M&G’s global equity team, sharing a fundamental focus on stockpicking. I also have direct access to the views of my colleagues at M&G’s dedicated real estate arm, Prudential Property Investment Managers (PRUPIM), one of the leading real estate investment managers in the UK. I believe that by combining M&G’s global equity expertise with that of its in-house property specialists in PRUPIM, the M&G Global Real Estate Securities Fund is in a strong position to provide enhanced long-term returns for investors.
Key to our investment strategy is the belief that over the long term, real estate security prices are strongly correlated to their net asset values. These are driven by underlying property fundamentals, such as rental growth, occupier demand or local supply and pricing trends. Screening down the total investment universe to around 650 stocks, we select those where the current valuation appears mispriced relative to their actual net asset value. The fund consists of 40 to 60 holdings with a typical investment horizon of three to five years. We are long-term investors and focus on convincing value creation, not on short-term trading gains. For example, I recently initiated a new position in Greentown China, one of the leading residential property developers in the world’s second largest economy. While Greentown’s return has lagged in the past due to its previous costly strategy of high asset turnover, the firm’s management team has taken steps to improve its debt levels and build on its excellent reputation for delivering high-quality properties.
e-fundresearch.com: Which benchmark is most relevant and how should investors compare the fund vs. benchmarks or peer groups?
Gillian Tiltman: For performance purposes, the fund is measured against the FTSE EPRA/NAREIT Global Developed Index. Portfolio construction, however, is not constrained by any benchmark index. If I can’t find sufficiently attractive stocks within a sector or region, I won’t invest there. The portfolio is not constructed with an index in mind and, indeed, owns a number of non-index holdings. Our comparable peer group consists of the global funds in the IMA Property Sector that invest indirectly in property.
e-fundresearch.com: Which performance did you achieve for the fund YTD and over the past five calendar years in absolute terms and relative to relevant benchmark or other reference indices?
Gillian Tiltman: In 2012 the fund achieved an annual return of 21.0% in euro terms, compared with 24.6% from the peer group. Since I took over the fund in July 2010, it has returned 12.6% yearly on average, compared to 11.9% for the peer group. (source: Morningstar, Inc., as at 31 December 2012, euro class A shares, net income reinvested, bid to bid basis).
e-fundresearch.com: What motivates you in your job?
Gillian Tiltman: I am motivated by the variety in my job – no two days are ever the same - by creating wealth as well as preserving it, and by educating investors as to the great opportunities which global real estate securities provide.
e-fundresearch.com: Which other profession would you have considered apart from becoming a fund manager?
Gillian Tiltman: A doctor.
e-fundresearch.com: Many Thanks!