The Marriott Property Equity Fund produced a total return of 5.6% for the 12 months ending 31 September 2018.

The SA Listed Property Index (SAPY) delivered a total return of -2.6% for the month of September. This took the SAPY's year-to-date return to -22.2%, underperforming cash, bonds & equities, which delivered returns of 5.5%, 4.9% & -3.7% respectively. The SAPY's underperformance was primarily driven by the continued poor performance of the Resilient property stable, which has been excluded from the fund's investable universe for many years.

The fund has an approximate 50% exposure to the property sector.

We have recently included Equites Property Fund into our portfolio. The company specialises in high quality modern logistics warehouses and has a growing footprint in both South Africa and the United Kingdom. This inclusion provides diversification to our fund in terms of geography as well as exposure to an increasingly relevant industry.

During the last quarter, we have seen many REITs come under significant pressure and were forced to cut their dividend forecasts, some by as much as 25%. We believe that this was primarily due to the industry coming under scrutiny regarding the use of once-off items to meet their dividend forecasts. This has had a limited impact on the Marriott Property Income Fund, as the companies we hold have clean earnings and minimal once-offs.

We continue to proactively manage the property component of the fund, to ensure that the REITs we hold are of the highest quality and can therefore deliver growth in dividends that is sustainable.

With regards to the cash component of the fund, investors have been well served by the decision to take advantage of attractive 5 year negotiable fixed deposit yields. As such, we expect a return in the region of 8% from this element of the portfolio in 2018