Real Estate Funds Are Not Affected By Evergrande’s Decline
The Evergrande case has reawakened the fear that a new Lehman Brothers will be repeated with worldwide repercussions. But analysts have ruled out that, despite the large volume of its debt and all the social and financial consequences that it may entail in China, by not having completed the construction of houses or having fulfilled its commitments to bondholders, the crisis of the colossus has passed through. the borders of the Asian giant.
In fact, if an investor were wary of real estate, they would be missing the 21% average return that funds in this category are providing this year, according to Morningstar, with data as of September 20. And there are products like Nordea 1 – Global Real Estate E EUR , Neuberger Berman Glb RE Secs EUR orBGF World Real Estate Securities E2 EUR exceeding 24%.
This profitability has served to recover from the losses they suffered last year. In March 2020, the worst month of the pandemic, when the toughest confinements occurred, real estate funds lost practically the same amount that they now carry livestock, but managed to reduce the fall to 14.4% at the end of the year, a Once the appearance of vaccines was returning to normality on the projections of the sector.
There is another piece of information that can help dispel the doubts of those who think about the repercussions of Evergrande: the average exposure of real estate funds to Asian countries is only 5.97% on average, although there are some products that exceed 7% . In addition, it must be taken into account that the long-term performance of this type of funds shows a good behavior: the average annualized return at ten years stands at 15.69%, while at three years they achieve 6.24% annualized.
Nordea AM assures that the United States, Canada, Sweden and the United Kingdom have been the areas that have helped boost the profitability of their fund, as they experienced faster reopens driven by the greater availability of vaccines. Logistics, residential and industrial have been the firms in the sector that have appreciated the most. In fact, storage firms have captured the attention of fund managers.
“The most important source of profitability of the fund so far in 2021 has been the real estate of logistics assets, which thanks to the boom in electronic commerce are seeing an increase in demand for their warehouses, for which there is not enough supply. This mismatch between supply and demand is allowing these types of companies to increase the price of their rents and their shares are reflecting it on the stock market. Segro, Prologis or Sagax stand out “, explains Carlos Lasure, manager of the Ibercaja Real Estate Sector.
In Nordea, they highlight that there are still other subsectors that must recover from the aftermath of the pandemic, such as those related to accommodation, commerce and health centers. “As cash flow returns to a more normalized level, we expect dividends to return to pre-Covid levels and return to between 4% and 6%, where they have historically been,” they say.
“Road transport infrastructures, in which the recovery of traffic has already exceeded pre-pandemic levels; construction materials companies related to improving the energy efficiency of buildings; and technological infrastructures, such as telecommunications towers or data centers are other sectors in which we see value today, “says Lasure.