Invesco Global Real Estate Fund Performance Analysis Q2 2024
The Invesco Global Real Estate Fund did not perform as well as its benchmark in the second quarter of 2024. This was due to weaker performance in cyclical exposures in the US and stock selection in Japan. The fund aims to find a balance between structural growth opportunities and economically sensitive REITs at reasonable prices.
Despite the slowing economic conditions, REIT valuations suggest there are opportunities for strong returns, especially when interest rates eventually decline. Rental fundamentals have remained steady for most property types, despite the challenging environment.
The fund’s manager believes that interest rates are more likely to decrease than increase from current levels. Global listed real estate saw a decline in the quarter, with varying performance trends across regions and sectors. In the US, health care and apartment REITs performed well, while sectors like lodging and timber lagged. In Europe, value real estate companies outperformed, and Japanese real estate returns were poor following a strong first quarter.
The fund is positioned to benefit from future interest rate declines and is overweight in sectors like health care, timber, lodging, self-storage, and data centers. It is underweight in retail and diversified sectors. The fund has increased its exposure to Europe, particularly in Germany, Spain, and the UK, as it believes that interest rate declines will make the region’s valuations attractive compared to private market values.
During the quarter, the fund adjusted its positioning in Asia, reducing exposure to Hong Kong and increasing exposure to Singapore. It also adjusted its exposure in the US, favoring data centers and longer duration property types while reducing exposure to apartment and billboard REITs.
Overall, the fund’s allocations across regions had a positive impact, with overweights in Europe contributing to strong returns. In the US, sectors like self-storage, multifamily, and industrial performed well, while industrial REITs detracted from returns due to weaker earnings outlooks.
Looking at performance highlights, the fund had a negative return for the quarter and underperformed its benchmark. Stock selection in the US and Asia was the main reason for the underperformance. The fund’s top contributors included Camden Property Trust and Public Storage, while top detractors included Terreno Realty Corporation and Sumitomo Realty & Development Co., Ltd.
In terms of standardized performance, the fund’s Class A shares had a negative return for the quarter, as did Class R6 and Class Y shares. The Custom Global Real Estate Index also had a negative return. Expense ratios for the fund vary by share class.
In conclusion, the Invesco Global Real Estate Fund’s performance in the second quarter of 2024 was impacted by weaker performance in certain sectors and regions. The fund’s positioning reflects a focus on growth opportunities at reasonable valuations and sectors that are expected to benefit from future interest rate declines. Despite the challenges, the fund remains optimistic about potential opportunities in the global real estate market.