Schroders Global Cities fund manager team win award amid a subdued local property market

The inaugural 2021 Citywire South Africa fund manager and group awards have announced the team of Hugo Machin and Tom Walker of global asset manager, Schroders, as the winners of the award for best property fund managers. While the local property market performance has seen some improvement recently, some risks still remain. The award represents the wider opportunity set available for local investors to tap into global skills and expertise by diversifying their property portfolios offshore.

“We have always been of the view that there is a compelling case for a Global REITs allocation to complement local investors’ allocation to South African REITs, despite their exposure to certain offshore markets. This is particularly the case for the Schroder ISF Global Citiesfund,” says Kondi Nkosi, Schroders country head in South Africa. He says this is because Machin and Walker bring a unique and differentiated investment philosophy and process to the Fund. 

While there are several offshore property funds available in South Africa, Nkosi says investors would do well to rethink the way that they traditionally look at investment opportunities in the asset class. He believes that the unique Global Cities approach adopted by the fund has contributed to the asset managers’ offshore real estate success – which also saw them win the 2020 Raging Bull Award for Best Offshore Global Real Estate General Fund. 

“Hugo and Tom follow a data-led investment process with ESG at its core. The process entails a two stage process that first takes the Global City exposure of a company’s assets and applies a rank based on four bespoke ‘Impact Scores’. This creates a list of companies eligible for the second stage. We call this list our Long Term Index (LTI). The second stage then begins at the LTI, and then incorporates a company ESG analysis using the Schroders bespoke ‘CONTEXT’ framework. The team then establishes maximum capital allocation and position sizing from the fundamental analysis that culminates in company valuations,” he explains. 

Nkosi adds that Global Cities are major centres of job creation, and notes this as a critical ingredient for real estate investment. “Cities with large and growing populations with high average earnings, that have quality universities that provide talented graduates that companies want to recruit or that launch new companies based on unique ideas, that have quality and efficient transport infrastructure as well as solid environmental policies are very attractive locations for companies to their establish operations. This then leads to more job creation, potentially higher wages, higher consumption expenditures, higher demand for real estate and so on. This virtuous cycle supports property values.”

Each Best Fund Manager award goes to the individual fund manager generating the highest risk-adjusted returns in a particular sector, this case property, amongst the South African peer group over the past three years. These returns are calculated to 31 September 2021 and are based on the individual track records for all funds they have run in the sector over this period.

Speaking in light of the award, Nkosi says that the recognition is a nod to Schroders’ excellent real estate management team and unique global cities approach.  

“Our real estate expertise stretches back to 1971 and since then has been consistently recognised by the real estate industry for its outstanding performance. To be recognised by the Citywire is an added honour,” he concludes.

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