OneAnswer KiwiSaver Scheme International Property Fund

The International Property Fund invests mainly in international listed property assets. Investments may include companies, funds or trusts that invest in property and are listed or are soon to be listed, and cash and cash equivalents.

The International Property Fund aims to achieve a return (after the fund charge and before tax) that over the long-term outperforms the relevant market index.

Minimum suggested investment timeframe is 10 or more years. The minimum suggested timeframe indicates how long to stay invested to manage short-term ups and downs and give your investment time to recover from any drops in value.

See Past updates for our funds.

International listed property had a challenging quarter, struggling against the backdrop of higher bond yields, rising inflation and a worsening fiscal outlook in the US. Higher bond yields and rising inflation expectations generally weigh on property valuations by reducing the relative attractiveness of property income streams and increasing financing costs for property companies. At the same time, ongoing tensions in the Middle East kept energy prices elevated and reinforced concerns that inflation could remain higher for longer.

At a regional level, Hong Kong (+6.1%) was the only major region to deliver a positive return, while Continental Europe (-10.8%) and Australia (-9.3%) were the weakest performing. Europe’s weakness reflected the region’s reliance on imported energy and key shipping routes that pass through the Strait of Hormuz.

Over the quarter, the US 10-year Treasury yield rose to 5.28%, while the 30-year Treasury yield finished above 5.50%, creating a difficult environment for global listed property markets.

At a sector level, healthcare was resilient. The sector benefited from favourable supply and demand dynamics, resilient operating fundamentals and a lower sensitivity to rising bond yields than many other property sectors. By contrast, residential property was among the weakest-performing areas of the market, particularly in Europe where leverage and regulatory concerns weighed on investor sentiment.

Relative performance was supported by a combination of stock selection and benchmark positioning. The fund benefited from several underweight positions within the residential property sector, including German residential landlord Vonovia and US apartment owners AvalonBay Communities and Mid-America Apartment Communities. Residential property was among the weakest-performing areas of the market during the quarter, with higher bond yields and rising financing costs weighing on sentiment, particularly in Europe where many property companies have relatively high levels of debt.

Holdings in data centre operators Equinix and Digital Realty Trust also contributed positively as investors continued to recognise the long-term growth potential associated with cloud computing and artificial intelligence infrastructure. Elsewhere, UK industrial property company SEGRO added value, supported by resilient demand for high-quality logistics and warehouse assets.

However, offsetting these gains were several holdings across the retail, office and residential sectors. TAG Immobilien was the largest detractor due to sentiment towards European residential property being weak. US property companies Federal Realty Investment Trust and Vornado Realty Trust also detracted, while retail property holding Unibail-Rodamco-Westfield weighed on returns as investors reacted to signs of softer consumer spending.