OneAnswer KiwiSaver Scheme International Property Fund

• Broadly speaking, US listed property benefited from falling bond yields, which tend to benefit property and other defensive assets that provide steady cash flows. As bond yields falls, those cash flows seem more attractive than those offered by bonds. Over the quarter, the yield on the US 10-year government bond fell 36 basis points, to 4.21%. 
• Geographically, Asian markets were some of the strongest performing regions, including Singapore (+4.6%), Hong Kong (+3.4%) and Japan (+5.9%). Singapore continues to benefit from its stable property outlook and declining interest rate expectations. Meanwhile, Continental Europe (-3.3%) was the weakest performing as it struggled against the back of higher bond yields, especially in Germany. German bond yields rose, reflecting concerns about increased defence spending within the region being funded through an increase in bond issuance. 
• Having the biggest positive contributions on the fund’s relative performance were two of its long-standing holdings, Welltower and Ventas, both of which operate in the healthcare sector. Shares in the companies rose 20.8% and 16.3% respectively as senior housing fundamentals continue to be supported by the tight supply of senior housing options and strong demand from an aging population. 
• Other positive contributors included overweight positions to Japanese real estate developer, Mitsui Fudosan and Klepierre, Europe’s second largest publicly traded mall operator. Both companies saw double-digit share price gains. 
• Meanwhile, strategic non-holdings of Iron Mountain and Vonovia also contributed to relative performance. US enterprise company Iron Mountain shares fell 18.3% after it delivered guidance that was just shy of forecasts, while shares in Vonovia, the European real estate company, fell 12.2%. 
• Offsetting these gains were some of the fund’s holdings in data centres, notably Digital Realty Trust and Equinix. Share in these two companies fell 19% and 14% respectively. Data centres were the worst-performing sector over the quarter, as investors grew concerned that aggressive development pipelines may outpace future AI-fuelled demand given improving efficiency for AI workloads.
• Other weak-performing holdings were Kimco Realty and Federal Realty Investment Trust. Kimco Realty, which specialises in owning and operating grocery-anchored shopping centres, and Federal Realty, which invests in shopping centres, both faced challenges from the broader economic environment, including fluctuating inters rates and inflation. This impacted consumer spending and retail performance.

The fund invests mainly in international listed property assets. Investments may include:

• Companies, funds or trusts that invest in property and are listed or are soon to be listed
• Cash and cash equivalents.

This chart shows the mix of assets that the fund generally intends to invest in – 100% listed property.

See the fund's actual investment mix on page 3 of the fund update.