Principal Global Property Securities (PGI0002AU) Report & Performance

Security selection within U.S. and Australian industrial contributed as we were overweight to stocks benefitting from strong earnings results. Overweight to U.S. single family rental contributed as the sector bounced back from first quarter underperformance. Underweights to U.S. malls was also additive as the sector continued to be pressured by fears of a consumer slowdown due to high inflation and gas prices. Positioning within U.S. data centers was a top detractor, as we were underweight to a REIT that benefitted from positive reports on data center leasing and pricing. Overweight to Canadian office detracted, with the sector lagging due to some risk-off investor rotation after outperformance earlier in the year.

From December 2018, the performance data shown is based upon the Fund’s official Net Asset Value (NAV) prices. The performance data shown is net of fees and other charges but excludes any potential entry/exit charges- as such the return an investor receives may be lower. Prior to 31st December 2018, the data performance calculations reflect the month-end market close prices of the Fund’s assets. After 1 January 2019, the performance data shown is based upon the Fund’s Net Asset Value (NAV) prices of the last Irish business day of the month. For Funds not open for dealing on this day this will be an indicative NAV. As a result, it is possible that the stated performance and the actual investment returns available to investors will differ. The performance information reflects performance of the D2 Class income units. Periods over one year are annualised. Investors should obtain their own independent tax advice. **Outperforming the FTSE EPRA NAREIT Developed NTR Index is not specifically included in the objective for the Fund, and the figures shown in the table are provided as a comparison only. Past performance is no guarantee of future results.

All figures shown in this document are in U.S dollars unless otherwise noted.Source & Copyright: CITYWIRE. Portfolio managers are A rated by Citywire for 3 year riskadjusted performance for the period 31 March 2019 – 31 March 2022. Citywire’s exclusive methodology ranks fund managers based on their individual track records across all funds they manage globally.

Equity markets rallied following a widely anticipated 25 bps rate hike from the Fed and a more hawkish outlook statement. Hope of a thawing in the Russia-Ukraine conflict likely contributed to the positive sentiment in the second half of the month, which saw growth stocks and yield-sensitive plays outperforming. Global REITs (FTSE EPRA/NAREIT Developed NTR, +4.5%) outperformed equities (MSCI World, +2.8%) and global bonds (Barclays Global Aggregate, -3.0%). The 10-year U.S. bond yield soared 60 bps. The Americas was the best performing region. Europe was the main laggard. APAC property stocks had positive performance.

Due to the global rotation away from defensive growth into value, overweight to underperforming defensive sectors like U.K. and Australian industrial, U.K. and U.S. self storage, and U.S towers and single family rental was a main detractor. Underweight to defensive U.S. data centers, which also underperformed due to the rotation, was a top contributor. Overweight to Japanese developers contributed, as higher beta players were out performers.

Market Review
Despite a hawkish Fed pivot and concerns over COVID-19 omicron, equity markets continued to grind higher on the back of continued low real interest rates and evidence that omicron’s severity was milder than prior variants. Global REITs (FTSE EPRA/NAREIT Developed NTR, +6.3%) outperformed broader equities (MSCI World, +4.3%) and bonds (Bloomberg Global Aggregate, -0.1%). The Americas was the strongest region by a wide margin. Europe lagged as weakness in the Continent diminished strength in the United Kingdom. Asia trailed behind dragged by weakness in higher beta Japanese developers.

Fund Review
Emerging market exposure was a main detractor, due to growth concerns as a result of property cooling measures, and another China residential developer’s bonds were downgraded to junk status. Underweight to the U.S. self-storage sector detracted as the sector continues to benefit from better-than-expected operating updates across occupancy and rental rate growth. With a rotation back into structural growth, overweights to solid fundamentals in U.S. single family rental, industrial, and towers were main contributors. Within U.S. industrial, overweight to a stock that received several sell-side upgrades was beneficial.

Emerging market exposure was a main detractor, as there continued to be concerns over the China property slowdown. Though government policy has shifted from tightening to stabilization, these supply side measures have been inadequate to stabilize demand. Underweight to U.S. malls was a drag on relative performance with the sector being a strong performer as retailers’ earnings results have highlighted robust consumer spending amidst a strong October retail sales report. U.S. data centers and towers positioning detracted, driven by M&A activity. Overweights to strength in U.K. self-storage and U.K. and Australian industrial stocks were the main contributors.

Risk assets sold off on rising stagflationary concerns caused by soaring energy prices, supply chain bottlenecks, and start-stop reopenings as governments struggled tocontain the COVID-19 delta variant. A hawkish Fed meeting during the month helped sparked a surge in U.S. 10-year bond yields. Rate sensitive property stocks (FTSEEPRA/NAREIT Developed NTR, -5.8%) underperformed global equities (MSCI World, -4.1%) and global bonds (Barclays Global Aggregate, -1.8%). Europe was the weakest performer as markets priced in slower growth driven by a combination of a surge in power prices and concerns that a China property-led slowdown would weigh on the export sensitive Euro area. After a relatively weaker first half, Asia was the outperformer, despite concerns over China dominating global headlines. The Americasalso had negative performance. Rising 10-year yields were in focus, coinciding with concerns of slowing growth.

Underperformance was mainly attributed to stock selection. Within Hong Kong, preference for developers over other sectors detracted amidst risk-off sentiment.Overweight to underperforming growth sectors such as U.K. student housing and self-storage, as well as high-quality office exposure in Spain, detracted. In the U.S.,overweights to single family rental and towers detracted. Underweight to malls was detractive. We missed on strength from Australian retail.Underweight to a U.S. data centers REIT contributed. Overweight to a U.S. health care REIT contributed due to positive updates on senior housing occupancy.