Henderson Property Funds Performance

Horizon Asia Pacific Property Equities Fund

Overview

Equity markets finished June and the first half of the year on a dismal note as banking writedowns and global stagflation fears continued to drive investor risk aversion. In Asia, the focus was on balance sheets and even large names with high leverage did not escape investor scrutiny. Credit markets in Asia remained troubled while real estate securities stayed out of favour.

Asian property securities declined a further 14% in June with broad-based weakness evident across all regions. Hong Kong was down 16%, Japan declined 14%, and Australia and Singapore posted declines of 9.7% and 11.7% respectively.*

Performance

The fund continued to perform well. This can be attributed to our maximum cash position, held since the beginning of June, and our underweights in all key markets except for Hong Kong.

Urban Corp detracted from relative performance in Japan but we quickly sold down our position before it declined further. Fortunately, this was offset by our key underweights in other Japanese names, and across China and Singapore. Although Hong Kong real estate performed poorly for the month, our stock selection in that market also added positively to performance.

Activity

Activity for the month of June was minimal, consisting mostly of investments into China. Although the sector fell slightly after our purchases, we continue to see an improving risk-return profile for selected names. In Singapore, we took some profits in CapitaMall and CapitaCommercial REITs, given richer valuations and the risk of dilutive capital raisings.

Outlook

Slower growth, increasing cost inflation and higher interest rates are prompting public and private real estate players to deleverage for the medium term. Better quality names are beginning to differentiate themselves and we look forward to significant value emerging.

We continue to believe in the long-term secular growth for Asian real estate but are prepared for a soft patch in the near term. Our focused and disciplined research process, combined with our investment experience in the region, will allow us to participate in and benefit from opportunities as they arise.

Horizon Global Property Equities Fund

Overview

June saw monthly returns in global equity markets threatening the largest one-month declines since the beginning of the credit crunch. In property equities, fears of increasing interest rates to combat inflation adversely affected the sector.

Asia dropped 13.4%, as banks tightened credit to real estate companies. Continental Europe fared only slightly better, losing 11.0%. The US was relatively stronger, although still ended the month in the red after negative numbers on consumer confidence and house prices.*

Performance

The European portfolio was positive for performance over the month where holdings in small-cap stocks and underweight positions in Quintain and Hammerson provided protection.

In Australia, an underweight position in benchmark giant, Westfield, proved costly. Urban Corp detracted from relative performance in Japan but we sold down our position before it declined further.

In North America, small-cap names held up much better than larger–cap stocks; relative performers included Digital Realty and Alexandria. Security selection within the apartment sector detracted from performance as did the allocation in the hotels sector.

Activity

During the month, we continued to trim positions in Europe, reducing holdings in British Land, Unibail-Rodamco and Fonciere Des Regions and increasing cash holdings.

In Asia, we exited the position in Hopson shifting into Guangzhou and KWG.

In North America, we sold AMB as it looked particularly expensive. We also took profits in Vornado, using proceeds from the sale to increase our positions in SL Green and Prologis.

Outlook

Slower growth, increasing cost inflation and higher interest rates are prompting rapid deleveraging among real estate players. The current environment presents significant challenges and we anticipate a period of slow growth ahead.

In the medium term, stock selection within the regions will be key. The long-term structural growth of Asian real estate will be sustained by economic growth across the region.

In Europe, the fallout from the credit crunch and weak consumer sentiment will continue to damage growth prospects. However, many stocks are well financed and should be able to maintain growth in cash income and dividends. Consequently, there are companies – mainly small- and mid-cap names – that have the capacity to outperform.

Horizon Pan European Property Equities Alpha Plus Fund

Overview

European equity markets saw the largest one-month decline since the beginning of the credit crunch, with double-digit falls in most countries. Rocketing oil prices and inflationary pressures ignited market concerns about economic growth and stagflation.

Swap rates in both the UK and Eurozone continued to rise, with the next move in interest rates in both areas now likely to be upwards.

The real estate sector moved broadly in line with the wider equity markets, with continuing concerns about slowing consumer spending and a weaker occupational market weighing on sentiment, despite already depressed stock prices.

Stocks in both Continental Europe and the UK fell sharply, with Swedish and German stocks amongst the worst performing. Overall the FTSE EPRA/NAREIT Europe (UK Restricted) Index declined by 12.4%.*

Performance

The fund performed well over the month, despite disappointing absolute returns. Swedish pair trades, via two long and two short positions, were a key driver of performance, with financing concerns driving both shorts down by over 20%.*

Greek stock, Babis Vovos, continued to aid relative performance, as did Finnish science park operator, Technopolis.

The fund’s underweight position in the UK majors, including selective short positions, also made positive contributions, although this was partially offset by declines in Derwent London, Development Securities and Big Yellow.

Activity

The fund remains underweight UK, France and the Netherlands, and overweight Eastern Europe and Russia. The net exposure of the fund remained between c.70-80% during the month, as we continue to take a cautious stance given the uncertain economic outlook, steepening interest rate yield curve and worsening occupational market.*

We reduced exposure to France over the month, and within the UK we took profits in several short positions mid-month. We also increased exposure to UK stocks that we feel are capable of adding value in a more challenging market and where prices appear to have fallen too far relative to fundamentals. On this basis we initiated holdings in Big Yellow, Derwent London and Development Securities, whose low gearing and active management should present opportunities.

Outlook

The fallout from the credit crunch is affecting rental values in London offices, and weak consumer sentiment is a common feature in most Western European countries. This is the ‘real’ economy, whereas problems were previously confined to capital markets.

On a more positive note, most stocks are well financed and should be able to maintain growth in cash income and dividends. Stock selection will play a key role in the coming months; there are a number of stocks – mainly small- and mid-cap names – that have the capacity to outperform.


Horizon Pan European Property Equities Fund

Overview

European equity markets saw the largest one-month decline since the beginning of the credit crunch, with double digit falls in most countries. Rocketing oil prices and inflationary pressures ignited market concerns about economic growth and stagflation.

Swap rates in both the UK and Eurozone continued to rise, with the next move in interest rates in both areas now likely to be upwards.

The real estate sector moved broadly in line with the wider equity markets, with continuing concerns about slowing consumer spending and a weaker occupational market weighing on sentiment, despite already depressed stock prices.


Stocks in both Continental Europe and the UK fell sharply, with Swedish and German stocks amongst the worst performers. Overall the FTSE EPRA/NAREIT Europe (UK Restricted)Index declined by 12.4%.*

Performance

The fund performed well over the month in relative terms, despite disappointing absolute returns. The decision to increase the fund’s cash balance in recent months proved beneficial, as was exposure to Orchid Developments and Bulgarian Land.

Dawnay Day Treveria, which invests in German retail properties, outperformed after announcing a strategic review of the business.

French exposure via ICADE and Klepierre was detrimental to performance as were UK stocks Inland, Development Securities and Warner Estates.

Activity

We continue to focus on selling smaller, less liquid holdings and those with secondary assets. Over the month we also reduced our exposure to developers, particularly in emerging markets, where increasing inflation is putting pressure on construction costs and debt finance is becoming scarcer.

We also continued to sell Scandinavian homebuilders JM and Sjaelso Gruppen where turnover is reducing.

On the buy side, we added to our position in Capital and Regional where we feel sentiment has taken the stock far below fundamental value.

Outlook

The fallout from the credit crunch is affecting rental values in London offices, and weak consumer sentiment is a common feature in most Western European countries. This is the ‘real’ economy, whereas problems were previously confined to capital markets.

On a more positive note, most stocks are well financed and should be able to maintain growth in cash income and dividends. Stock selection will play a key role in the coming months; there are a number of stocks – mainly small- and mid-cap names – that have the capacity to outperform.


The Henderson Horizon Fund (the “Fund”) is a Luxembourg SICAV incorporated on 30 May 1985. This document is intended solely for the use of professionals and is not for general public distribution. Any investment application will be made solely on the basis of the information contained in the Fund’s prospectus (including all relevant covering documents), which will contain investment restrictions. This document is intended as a summary only and potential investors must read the Fund’s prospectus before investing. A copy of the Fund’s prospectus can be obtained from Henderson Global Investors Limited in its capacity as Investment Manager and Distributor.

Issued in the UK by Henderson Global Investors. Henderson Global Investors is the name under which Henderson Global Investors Limited (reg. no. 906355) (incorporated and registered in England and Wales with registered office at 4 Broadgate, London EC2M 2DA and authorised and regulated by the Financial Services Authority) provide investment products and services.

Telephone calls may be recorded and monitored. Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Past performance is not a guide to future performance. The performance data does not take into account the commissions and costs incurred on the issue and redemption of units. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change. The Fund is a recognised collective investment scheme for the purpose of promotion into the United Kingdom. Potential investors in the United Kingdom are advised that all, or most, of the protections afforded by the United Kingdom regulatory system will not apply to an investment in the Fund and that compensation will not be available under the United Kingdom Financial Services Compensation Scheme.

A copy of the Fund’s prospectus, articles of incorporation, annual and semi-annual reports can be obtained free of cost from the Fund’s: Austrian Paying Agent Raiffeisen Zentralbank Österreich AG, Am Stadtpark 9, A-1030 Vienna; French Paying Agent BNP Paribas Securities Services, 3, rue d’Antin, F-75002 Paris; German Information Agent Marcard, Stein & Co, Ballindamm 36, 20095 Hamburg; Belgian Financial Service Provider Van Moer Santerre & Cie S.A. Société de bourse, Drève du Prieuré 19, 1160 Bruxelles; Liechtenstein Paying Agent and Representative VP Bank AG, Aeulestrasse 6, LI-9490 Vaduz; Spanish Representative Allfunds Bank S.A. Estafeta, 6 Complejo Plaza de la Fuente, La Moraleja, Alcobendas 28109 Madrid; or Swiss Representative Fortis Foreign Fund Services AG, Rennweg 57, 8021 Zurich. Fortis Banque (Suisse) S.A., Rennweg 57, 8021 Zurich is the Paying Agent in Switzerland.

*Source: Datastream, Henderson Global Investors