Viewpoint: Listed Property Update

Prudent stock selection crucial to generate active returns in the listed property market

• The strong performance of the SA listed property sector in 2011 continued in the first 4 months of 2012.
• The Investec Property Equity Fund generated positive active returns for the period as our positions taken in 2011 came to fruition.
• We are confident that the sector will continue to deliver decent real returns, but prudent stock selection will be crucial.
• There are a number of headwinds however the sector offers reasonable value, especially considering that an alternative asset class such as cash provides a real yield of 0%.
• An emphasis on buying high quality companies with superior distribution growth, will continue to drive our improving active return profile.

Prudent stock selection will be crucial

The strong performance of the SA listed property sector in 2011 continued in the first 4 months of 2012 with the asset class returning a healthy 10.9%, better than domestic equities, bonds and cash. While the sector’s returns were attractive, it was even more pleasing that we generated returns well ahead of the average of our peer group over this period. Our strong performance was thanks to active positions taken in 2011 that came to fruition and our ability to capitalise on an increase in corporate activity.

Looking forward, we are confident that the sector will continue to deliver decent real returns, but prudent stock selection will be crucial. In general, the sector offers reasonable value, especially considering that an alternative asset class such as cash provides a real yield of 0%. However, there are a number of headwinds facing the sector. These range from global macroeconomic uncertainty to rising administrative costs and an oversupply of space in certain sectors, such as offices. Our experience in the market coupled with an emphasis on buying high quality companies with superior distribution growth, will continue to drive our improving active return profile.

Important Information

Collective Investment Schemes in Securities (CIS) are generally medium- to long-term investments. The value of participatory interests may go down as well as up and past performance is not necessarily a guide to the future. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees and charges and maximum commissions is available on request from the company/scheme. Commission and incentives may be paid and if so, would be included in the overall costs. Forward pricing is used. The scheme trustee is FirstRand Bank, PO Box 7713, Johannesburg, 2000, Tel: (011) 282 1808. Investec Fund Managers SA Ltd is a member of Association for Savings and Investments South Africa (ASISA). All information and opinions provided are of a general nature and are not intended to address the circumstances of any particular individual or entity. We are not acting and do not purport to act in any way as an adviser or in a fiduciary capacity. No one should act upon such information or opinion without appropriate professional advice after a thorough examination of a particular situation. We endeavour to provide accurate and timely information but we make no representation or warranty, express or implied, with respect to the correctness, accuracy or completeness of the information and opinions. We do not undertake to update, modify or amend the information on a frequent basis or to advise any person if such information subsequently becomes inaccurate. Any representation or opinion is provided for information purposes only. Investec Asset Management is an authorised financial services provider.

This communication is only for professional investors, professional financial advisers and, at their exclusive discretion, their clients. It is not to be generally distributed to the public.