Global Listed Real Estate – a liquid, unconstrained way into real estate exposureMichael Gobitschek, Skagen

Global Listed Real Estate – a liquid, unconstrained way into real estate exposureLuxemburg NIMF, October, 2017Michael Gobitschek | Lead Portfolio Manager SKAGEN M2

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Why invest in real estate?• Predictable cash flow and return, with potential capital gain and inflation protection

• Long-term low correlation with other asset classes

• Real estate reflect local dynamics, and offer diversification advantages

• Land is a scarce resource. Urbanisation, population growth and increased wealth are important value drivers for property markets.

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Long-term asset class performance (US)

Source: GSAM; An appraisal of real estate securities. Factset, NCREIF. Dec 31, 2016. .

All Equity REITs Index; NCREIF Property Index; S&P 500; Barclays US Aggregate Credit Corporate Investment Grade Index

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Benefit of listed property vs. direct+ Liquidity and ease of implementation - Volatility

+ Access to non traditional property types - Correlation to traditional asset classes

+ Diversification at any commitment level

+ Financial transparency

+ Low cost/ minimum investment/ fees

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Listed real estate more stocks than real estate?

Source: Cornerstone Research based on data from NAREIT, S&P, NCREIF and the MIT Center for Real Estate. Rolling Returns, Quarterly Data 1984:2‐2014:4

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Why go global?• Professional RE investors normally focus on real estate that are geographically close

• Real estate is one of few assets that are not priced globally but locally

Investing in global listed real estate gives the following benefits:

- A possibility to tap in on worldwide economic growth- Multiple diversification: currency, cities, category of property/segment, variety of

leasing and financing maturity- Transparency and liquidity in the investment- Improve the overall risk/return profile- Benefit from local managements “know how” and network in their home market- Possibility to move from fair valued to undervalued markets or sub-segments

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Real estate is mainly local business

USDSource: As of 6th Oct. 2017. Source: FTSE, EPRA, NAREIT, Thomson Reuters DataStream, UBS estimates. Regional/country real estate total return figures calculated using the FTSE EPRA/NAREIT (total return) real estate indices

~35%

~103%

MSCI China Real Estate Index YTD as of OCT 6th in USD

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MEGA-trends drive long-term demand for real estate

Consequences / value drivers:

• Housing shortage• Land shortage• Modernization demand• Longer lifespan • Growing cities• Investable assets growth• Alternative energy sources• Increased asset competition• Investments in infrastructure• Growing global middle-class• Single households increases• Consumption/purchase power

Geopolitics / Climate

Sustainability

Globalization

DisruptiveTechnology

Urbanization / Migration

Population Growth

Shift In Economic

Power

AgingPopulation

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Real Estate Risk/Return Profile– How does the case fit into the portfolio?

Macro/political Trends– How does it support the case short term/long term

Real Estate Mega Trends– How is the case supported by these trends, drivers for the case?

3U - How does the case meet the 3U’s?

Urbanization/migration

Population growth

Shift in economical

power

Return

Risk

• +3 000 listed RE companies globally• Screening• Risk• Valuation/triggers• ESG• Positioning/size• Monitoring• Site visit

• Interest rates• FX• FDI• Stimulus/ tightening

Ageing population

Disruptive Technology

The fundamentals The supportives

SKAGEN m² – Road map: Process / selection of company

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There are more and more of us…

-

2.500.000.000

5.000.000.000

7.500.000.000

10.000.000.000

1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050

Total world population

Source: World Bank

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…and we move to urban areas

~54%urban in 2017

~72%urban in 2050

Source: World Population Density (People/sqkm

Source: World Bank

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“Super cities” – Most populated cities (millions)

6

6

14

5

6

6

7

8

9

13

Tokyo

New York

Osaka

Los Angeles

Moskva

Buenos Aires

Shanghai

Chicago

London

Paris

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20

38

19

20

21

21

21

24

26

Shanghai

Dehli

Tokyo

Beijing

Mexico City

Mumbai

Sao Paulo

Osaka

Cairo

New York

1955 2015

Source: World Economic Forum

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”New” world cities drives demand on all real estate segments

Office / Hotels/ Housing/ Retail Retail / Logistics

Source: Oxford Economics 2016 Q3

14

259425 444 471 480

1 1202 001

2 936

3 977

264263247

1 792

2024

3 670

North America

2034

Europe

4 721

2 704

2004 2014

History Prognosis

6.4 mrd. 7.2 mrd. 8.0 mrd. 8.6 mrd.

Global population

Source: Oxford Economics 2016 and 2014. *Middle income households includes those with annual income of US$35,000 – US$70,000 (2012 prices and exchange rates). **High-income households includes those with annual income grater than US$70,000

People (millions)

Emerging Markets

Global middle class – a new economic power factor

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We’re getting older and more able to “consume” more real estate

Source: Global coalition on Aging

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SKAGEN m² - fund performance versus benchmark (EUR, net of fees, Oct 2nd, 2017)

Note: All returns beyond 12 months are annualised. Inception date: 31 October 2012. Last updated: 2/10/2017. All figures in EUR net of fees.* The benchmark index prior to 11 July 2017 was the MSCI ACWI Real Estate IMI

YTD 3 months 6 months 1 year 2 years 3 years Since inception

SKAGEN m² 8,6% 2,8% 5,6% 11,7% 28,4% 10,1% 7,6%

MSCI ACWI Real Estate* 4,6% 3,8% 1,3% 5,0% 21,0% 11,4% 10,3%

Relative 4,0% -1,0% 4,2% 6,7% 7,4% -1,2% -2.7%

-5,0 %

0,0 %

5,0 %

10,0 %

15,0 %

20,0 %

25,0 %

30,0 %

YTD 3 months 6 months 1 year 2 years 3 years Since inception

SKAGEN m²

MSCI ACWI RE ex REITS

Relative

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• The fund invests in listed real estate companies around the world with daily liquidity

• Broad global mandate with exposure to a broad variety of real estate companies for increased flexibility and enhanced risk management

• The fund strives for a long-term property like return, based on a balanced risk/return profile

• The fund is actively managed based on SKAGEN’s long-term value philosophy;- where the market undervalues the assets and/or

value creation potential- we can identify catalysts for its value to be

reflected in a higher price over our investment horizon (3-5 years).

• Independent thinking is key to success.

SKAGEN m2 – Overall philosophy

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Ranking

City Wire Global Equity*‐ Property 1 yr (31/8‐17) UK NOR SWE NDL LUX

SKAGEN m2 1 1 1 1 1

number of Peers 54 23 33 41 48

Michael Gobitschek 1 1 1 1 1

number of Peers 66 35 46 53 63

City Wire Global Equity*‐ Property 3 yrs (31/8‐17) UK NOR SWE NDL LUX

SKAGEN m2 3 2 1 2 4

number of Peers 45 20 30 37 40

Michael Gobitschek 6 2 1 5 5

number of Peers 46 25 32 39 42

SKAGEN m² - rating

Note: Only clean real estate mandate

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Important information

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