The Brexit vote hit UK commercial property funds hard, but there are strong areas of growth overseas, Hugo Machin has claimed.
The co-head of the Schroders Global Cities Real Estate Securities fund said the EU referendum result had knocked the UK off its number 4 spot in the Global Cities 30 Index run by Schroders, falling to 10th place.
Shanghai took the top spot in August, pushing New York into second place. According to the index, China’s mega-cities took three of the top five places in the index, which assesses and ranks the growth and future prospects of 161 global cities.
China’s most populous city, Shanghai, has 22m residents. It came ahead of Tianjin (third), the country’s third largest city, and the capital Bejing (which came in fourth place).
China is still growing more strongly than the rest of the world and we believe it will become a much bigger part of our forecast over time Hugo MachinAccording to Mr Machin, these top global cities will be the true drivers of economic growth in their respective countries in the coming decades.
“It should be no surprise China’s cities rank so highly given it has strong factors such as GDP, working population and retail sales.
“Although it has slowed recently, China is still growing more strongly than the rest of the world and we believe it will become a much bigger part of our forecast over time.”
However, Mr Machin said investors should not be too despondent about the current poor performance of London, particularly post-Brexit.
“London’s fall in the index should not prompt despondency,” he stated, adding it remains one of the fund’s favourite cities, with more high-skilled knowledge-based workers than New York and with huge transport infrastructure projects, such as Crossrail, making a tangible difference to its economic future.
“It is a cultural melting pot, home to more nationalities than any other global city.”
Top 10 Global Cities
1 | Shanghai |
2 | New York |
3 | Tianjin |
4 | Beijing |
5 | Dallas |
6 | Shenzhen |
7 | Los Angeles |
8 | Houston |
9 | Washington |
10 | London |
Source: Schroders and Oxford Economics, as at 31 July 2016
The Schroders Global Cities 30 index is compiled on a range of factors, including the projected growth of the economy and disposable incomes over the next decade and the size of the working population.
On 1 August, the Schroder Global Real Estate Securities fund changed its name to Global Cities Real Estate Securities Fund to better reflect the focus of the fund. There was no change to the mandate or investment strategy.
In a letter sent out to investors, seen by FTAdviser, it said: “We believe the strongest global cities will grow, in economic terms, faster than small cities and regions.
“Seventy per cent of the fund’s investments are exposed to companies that invest significantly in real estate in the top 30 cities in the world (as ranked by our proprietary Global Cities database).”
