investor presentation€¦ · benefits of listed real estate 14 no liquidity mis-match resilient...

DRAFT

June 2020

FP FORESIGHT SUSTAINABLE REAL ESTATE SECURITIES FUND

INVESTOR PRESENTATION

FP Foresight Sustainable Real Estate Securities Fund |

Table of Contents

2

1 Introduction to Foresight 4

2 Investment Philosophy: Sustainable Real Estate 11

3 Investment Strategy and Process 17

4 The Portfolio 22


OEICs

This has been approved as a financial promotion for the purposes of Section 21 of the Financial Services and Markets Act 2000 by Foresight Group LLP

(“Foresight Group”). Foresight Group is authorised and regulated by the Financial Conduct Authority (FRN 198020). Its registered office is The Shard,

London SE1 9SG. FundRock Partners Limited is the authorised corporate director of the Fund and Foresight Group is the investment manager. We

recommend investors seek professional advice before deciding to invest. Investors must read the Fund Prospectus (“Prospectus”) and Key Investor

Information Document (“KIID”), dated June 2020, before making an investment decision. The opportunity described in this document may not be suitable

for all investors. Attention should be paid to the risk factors set out in the Prospectus. Words and expressions defined in the Prospectus shall have the

same meaning in this Investor Factsheet. Foresight Group does not offer investment or tax advice. The value of an investment in the Fund, and any

income from it, can fall as well as rise. Investors may not get back the full amount they invest. Past performance is not a reliable indicator of future

results. This presentation contains simulated past performance information, which is no guarantee of future performance. Personal opinions may change

and should not be seen as advice or a recommendation. There are a number of other risks connected to an investment in the Fund, including (but not

limited to) counterparty risk, liquidity risk and volatility. These risks are explained in the Fund Prospectus. The Fund focuses on the global listed real estate

sector only and will have a less diverse portfolio than the average OEIC. We respect your privacy and are committed to protecting your personal data. If

you would like to find out more about the measures we take in processing your personal information, please refer to our privacy policy, which can be

found at https://www.foresightgroup.eu/privacy-cookies/.

Capital is at risk.

3


Introduction to Foresight

4

SECTION 1


Foresight Group OverviewA leading sustainability-driven global infrastructure and private equity manager

As at 31 March 2020

£4.7bn

assets under management

£4.1bn

Infrastructure AUM

£571m

Foresight Capital Management

AUM

12

offices in 3 continents

228

group staff globally

ESG

sustainability-led investments

5

FP Foresight Sustainable Real Estate Securities Fund | 6

▪ The Foresight Capital Management team have been managing OEICs that invest in real assets since 2017.

▪ The team have a specialist and wide ranging knowledge of the listed real asset market, with investments in infrastructure, renewable energy and property.

Real Asset Investment Specialists

▪ Foresight Capital Management are significant investors in companies that provide a social or environmental benefit. This is a must for all investments.

▪ The Foresight Sustainable Real Estate Securities Fund has included its Sustainable Investment Criteria into the Fund’s investment policy.

InvestmentCompany Experience

▪ A real asset perspective to equity investing rather than an equity perspective to real asset investing.

▪ The team are focused on the quality of both the asset and its future cash flows.

Sustainability Lead Investment Team

▪ The Fund’s portfolios are truly global, and the management team have visited companies in Europe, North America and Asia Pacific.

▪ The team are proactive in engaging with companies, both to assess their credentials and to encourage improvements to their levels of sustainability.

Active Mangers With Global Reach

Listed Real Asset Investment Specialists

Leaders in Sustainable Investing

An Asset First Approach

Specialists in listed real assets


FP Foresight Sustainable Real Estate Securities Fund | 7

NAV£502m

Total Return+25.8%

Trailing Yield5.30%

As at 8 June 2020, performance since inception

Proven track record managing portfolios of listed real assets


NAV£173m

Total Return+20.4%

Trailing Yield4.1%



8

The Fund is managed by a team of listed real asset investment specialists and material investment decisions are approved by the Fund’s Investment Committee.

Fund Managers Investment Committee

Mark Brennan

Lead Fund Manager

Nick Scullion

Co-Manager

Eric Bright

Investment Manager

David Hughes

Chief Investment Officer

Bernard Fairman

Chairman and Founding Partner

Nigel Aitchison

Head of Infrastructure

Philip Stephens

Independent Director

Mark is the Lead Fund Manager responsible for investment decisions. He is also the Lead Fund Manager for the FP Foresight UK Infrastructure Income Fund, where he has a successful track record of investing in REITs. Prior to joining Foresight in 2017, Mark held a range of roles within the alternative investment space, including at Aberdeen Standard Investments and the UK Green Investment Bank.

Nick is the Head of Foresight Capital Management and is responsible for fund management and growth of Foresight's open-ended fund business. He is the lead manager of the FP Foresight Global Real Infrastructure Fund. He joined Foresight Group in 2017 and has nine years of experience in fund management, capital markets and corporate finance..

Eric Bright joined Foresight Group in 2019 and currently works as an Investment Manager. He has over 5 years of experience, previously managing a fund and discretionary portfolios at Reyker Securities. He is responsible for fund management in Foresight’s open-ended funds business. Eric is a CFA Charterholder.

David joined Foresight in 2004 and is a member of the firm's Executive Committee and has over 40 years of investment experience having started his career in 1974 at 3i where he was responsible for advising public and private companies on corporate strategy, acquisitions, disposals, mergers and capital raising.

Bernard formed Foresight Group in 1984. He has managed multiple portfolios through to IPO or trade sale. Responsible for strategic direction andmanagement of Foresight through organic growth and acquisition to leading positions in the VCT and UK environmental infrastructure markets.

Nigel Aitchison joined Foresight Group in 2009 and is a Partner and Head of Infrastructure based in the London office. A member of the firm's Executive Committee, he has over 30 years of experience covering specific areas such as waste management, project finance and fund management.

Philip retired from the City after nearly 40 years working in UK Corporate Finance for various financial institutions including Lazard, Chase Manhattan and UBS where he was head of UK Corporate Finance. Since 2002 he has served on the boards of many companies as a non-executive Director mostly as Chairman.

Investment Team


FP Foresight Sustainable Real Estate Securities Fund

9

Fund Features FP Foresight Sustainable Real Estate Securities Fund

Strategy Objective To provide an attractive income yield, that can be either distributed or reinvested, by investing in a global portfolio of sustainable listed real estate companies.

Performance Objective The Fund aims to provide an income yield of 4% net of fees with a secondary objective to achieve capital growth over a rolling 5 year period.

Fund Structure FCA authorised UCITS.

Investment Universe Real estate companies, which will primarily be structured as a Real Estate Investment Trust “REIT”, who are listed on major global stock exchanges. Each company must be a viable long term investment and meet the Fund’s Sustainable Investment Criteria.

Investment Style A real asset approach to equity investing rather than an equity approach to real asset investing.

ESG Sustainability is fully integrated into the investment process and the Fund’s Investment Policy. All investments must meet the Sustainable Investment Criteria.

Investment Basis Long-only.

Number of Stocks 20-35 listed real estate companies.

Currency Management GBP unhedged share class launching June 2020. Hedged share classes pending investor demand.

Inception 15 June 2020.

Fund features



10

1

2

3

4

5

A resilient yield in a low rate environment The Fund will target a 4% income yield, which will be generated by property sectors enjoying tailwinds. In a low and uncertain income environment, this can act a stable source of income for investors who are reliant on income.

A highly liquid route to real estate exposureThe Fund will invest solely into listed Real Estate Investment Trusts (and similar). This means that liquidity is subject to being able to trade the shares on a stock exchange, as with an equity fund, and not on buying or selling physical properties, which can take weeks or months.

Specialist and award winning fund management teamThe Fund is managed by an award-winning fund management team, with a multi year track record of investing in listed real estate.

Contributing directly to a sustainable future We will invest only in companies that deliver a net social or environmental benefit, meet the ten principles of the UN Global Compact and meet one of four pre-defined UN Sustainable Development Goals.

Diversified global exposure to growth sectorsThe Fund will provide investors with a globally diversified exposure to real estate, investing in companies with assets in Europe, North America and developed Asia. The portfolio will focus on growth sectors such as logistics, medical properties, social housing and data centres.

Five reasons to invest


Investment Philosophy: Sustainable Real Estate

11

SECTION 2


“Sustainability in the real estate sector is a prominent issue as the industry has a significant impact on the environment; buildings are responsible for 40% of energy consumption and 36% of CO2 emissions in the EU.”

European Public Real Estate Association

|

Real Estate houses the economy, and so an approach to sustainability that fails to address the energy consumption, carbon emissions and wider implications of real estate is destined to fail.

Modern day Real Estate is progressing, integrating new technology and increasing efficiency to improve standards across the board.

Aside from environmental factors, Sustainable Real Estate can have a significant positive impact on society.

Through the allocation of capital, ordinary investors can play a vital role in supporting those companies that are having the biggest impact on a more sustainable future for our communities and the planet.

Sustainable Real Estate

12


Introduction to Listed Real Estate

13

£1.3tntotal capitalisation of the global listed REIT market

806individual REITs

Since its establishment in the 1960s, the listed real estate sector has become a mature and well established asset class within public markets

44%of US households invest in REITs

Source: Bloomberg & Nareit


Benefits of Listed Real Estate

14

No liquidity mis-match

Resilient sectors

Diversification

Shares in REITs are daily traded like any other public company, and can be bought and sold at any point throughout the trading day. This fully aligns the daily liquidity of the Fund’s structure with the liquidity of the assets it holds.

Through investing in a portfolio of REITs that each hold large numbers of properties, the Fund is able to provide exposure to thousands of individual assets diversified across sectors and geographies .

The Fund will invest into sectors of the property market that are well positioned to take advantage of modern tailwinds, such as the growth of e-commerce, evolving health care needs and data storage.

The Fund is designed to provide investors with a liquid exposure to real estate. This is achieved by the Fund investing exclusively into the publicly traded shares of listed REITs, rather than directly into bricks and mortar. This approach provides several core advantages:

As a % traded of market

capitalization, UK REITs

are more liquid than UK

equities, with Global REITs

4% more liquid than

Global Equities*

Source: Bloomberg. Average 6 month daily traded volumes used. UK Equities = FTSE All Share Index & UK REITs = FTSE EPRA/NAREIT UK Index. Global Equities = FTSE All World Index & Global REITs = FTSE NAREIT Developed Index.


Model Portfolio Back-Testing

15

Back-tested total returns of the Model Portfolio over the five years to June 2020 indicate the attractiveness of sustainable real estate investments. Since June 2015, the back-tested Model Portfolio has returned 14.91% p.a. vs 10.29% p.a. for global equities.

Source: Bloomberg. Returns to June 2020 in GBP. Total return index used.

Model Portfolio Performance% Total Return

-20

0

20

40

60

80

100

120

140

05/06/2015 05/12/2015 05/06/2016 05/12/2016 05/06/2017 05/12/2017 05/06/2018 05/12/2018 05/06/2019 05/12/2019

FP Foresight Sustainable Real Estate Securities Fund FTSE All-World Index


Recovery Potential of Listed Real Estate

16

REITs have historically performed strongly following period of market turmoil. Using the equity market low in 2009 following the Global Financial Crisis, the below charts display the outperformance of REITs vs equities in both the UK and the globally. REITs perform well in uncertain times.

REITs have historically outperformed equities after market falls

Source: Bloomberg. UK Equities = FTSE All Share TR Index & UK REITs = FTSE EPRA/NAREIT UK TR Index. Global Equities = FTSE All World TR Index & Global REITs = FTSE NAREIT Developed TR Index. All figures in GBP.

22%

30%UK REITs

UK Equities

Global Equities

24%

Global REITs 34%

3 Year Annualised Return %

UK REITs UK Equities Global REITs Global Equities

19%

UK REITs

Global REITs

UK Equities

Global Equities

28%

23%

18%



Investment Strategy and Process

17

SECTION 3


Portfolio Construction

18

ESG Markers

All listed companies that were tagged within Bloomberg as being classified as REITs on a global basis. This screening generated 806 companies with a combined market capitalisation of £1.3tn.

All companies with a market capitalisation less than £300m and/or volatility of more than 35% were removed. This left 414 companies.

All companies listed in non-OECD countries were removed. This left 706 companies.

Finally, all remaining companies were screened using ESG markers, such as Sustainalytics, and the UN Sustainable Development Goals. This left an investable universe of 86 companies.

806

86

706

414

A total of 86 listed REITs were identified, with a combined market capitalisation of £637bn.

Target screening of the REIT universe identified an attractive opportunity set

Market Cap and Volatility

Listing location

REIT Universe

86

Launch Portfolio


Foresight Capital Management Investment Process

19

An active approach to company engagement

A Focus on Engagement

We believe that engagement is a vital part of our active management investment process.

Meeting with the management teams of potential and current companies allows for a deeper understand of how the business operates and their strategy.

Global Reach

The Fund will hold assets in multiple geographies in order to provide a diversified portfolio.

The Fund management team are proactive in their approach to engagement and have visited companies throughout North America, Europe and Asia.

Strategy Assessment

The company’s strategy is assessed to ensure that the company has the ability to meet the portfolio’s investment objective.

We are long term investors, and so the company must represent a viable long term strategy which can translate into returns for the Fund’s portfolio.


Foresight Capital Management Investment Process

20

An asset up approach to investment due diligence

Assessment of the underlying assets

The underlying assets that make up the Company’s portfolio are analysed in order to assess the quality of the assets themselves, and the quality of the future cash flows.

Review of the REIT portfolio’s composition

The Company’s wider portfolio is reviewed to assess the core drivers of the Company’s risk and return profile.

Evaluation of the Company’s stock market valuation

The prevailing valuation for the Company is evaluated to ensure an optimal entry point and that fair value is achieved.


Foresight Capital Management Investment ProcessAssessment against the Sustainable Investment Criteria

Stage 2: UN Sustainable Development Goals

Stage 1: UN Global Compact Stage 3: Qualitative Assessment

21

1 32

In order to be included with the portfolio, all investments must provide a net social or environmental benefit and meet the Fund’s 3 part Sustainable Investment Criteria.

On the basis of detailed due diligence and discussion with management, does the fund management team believe that sustainability is a core and long-term focus of the company’s portfolio and strategy?

The company must make a demonstrable impact against one of four Sustainable Development Goals.

The company’s strategy, economic activity and fundamental purpose must be consistent with all of the 10 UN Global Compact Principles.


The Portfolio

22

SECTION 4


Portfolio Sector Breakdown

23

The Fund has exposures to a variety of different sectors, proving multiple sources of returns

30.00%

28.50%

8.25%

7.50%

6.50%

6.00%

5.00%

4.75%3.00%

Data Centres 8.25%

Communications 3.00%

Logistics 30.00%

Healthcare & Social Housing 28.50%

Forestry 6.50%

Self Storage 7.50%

Offices 6.00%

Commercial 5.00%

Government Property 4.75%


Geographic Asset Breakdown

24

The Fund is globally diversified, providing access to leading real estate across the globe

US 45.50%

Australia 3.00%

Japan 6.00%

UK 45.00%

Asset % of Portfolio (listing location)

Europe 4.15%

US 43.67%

Australia 1.61%

Japan 6.34%

Hong Kong 0.51%

UK 43.19%

Asset % of Portfolio (asset location)


Top 10 Portfolio Holdings

25

Company Listing Location Sector Target Allocation1

Civitas Social Housing UK Healthcare & Social Housing 9.75%

Tritax Big Box UK Logistics 9.75%

Medical Properties Trust US Healthcare & Social Housing 7.00%

Physicians Realty Trust US Healthcare & Social Housing 7.00%

Supermarket Income UK Commercial 5.00%

LondonMetric Property UK Logistics 4.75%

Office Properties Income Trust US Government Property 4.75%

Primary Health Properties UK Healthcare & Social Housing 4.75%

PotlatchDeltic US Forestry 4.50%

CoreSite US Data Centres 4.25%

The top 10 portfolio holdings contains exposures to multiple key sectors

As at 15 June 2020.


Company name

Company Overview Investment Characteristics

Sustainability Review

UK-listed REIT focused on specialist housing for the supported living sector

Properties cater for individuals with long-term, non-acute physical and mental impairments and disabilities

Listed in 2016, with current market capitalisation of £665m

Portfolio of 599 properties and over 4,000 individual tenants

Civitas receive rent from Housing Associations and Care Providers

The funding they receive comes directly from Local Authorities, who themselves are funded by the UK Welfare Budget

This 100% central government funding provides very robust income security for Civitas and provides a long term market for the high quality, specialist supported living properties that they develop and lease

At the current share price, will deliver a 5% yield

26

Very high impact on social outcomes for individuals and communities

Clear alignment with SDG 3: Good Health and Wellbeing

Explicit corporate objectives:

1. Availability. To increase the availability of social housing across England and Wales, particularly for vulnerable people.

2. Quality. To improve the quality of social housing.

3. Value For Money. To offer value for money for the public purse

Civitas Social Housing


Company name

Company Overview Investment Characteristics

Sustainability Review

£2bn UK listed REIT that invests solely into Big Box logistics assets

High quality tenants, over 80% of which are listed on major stock exchanges

Big Box warehouses are extremely large, strategically located and form a key part of a company’s supply chain

Over 50% feature robotics and automation

Modern and purpose built asset base

High quality tenant base, with Amazon 13% of the rent roll

Demand for quality assets remains strong

Portfolio well positioned to enjoy e-commerce tailwind

At the current price, the dividend yield is over 4% with potential for growth

27

All assets are subject to a Green Property Review

87% of portfolio now have an EPC of A-C

All new developments have a BREEAM rating of at least very good, with some rated excellent

The modern portfolio means that assets are energy efficient and are able to facilitate modern automation

Directly aligns with SDG 9: Industries, innovation & infrastructure

Tritax Big Box



28

Fund Name: FP Foresight Sustainable Real Estate Securities Fund

Fund Structure: A sub-fund of FP Foresight OEIC, a UK open-ended investment company (“OEIC”)

Regulatory Status: FCA Authorised UCITS

IA Sector: Property Other

Unit Type: Income & Accumulation

Currency: GBP (unhedged)

Minimum Investment:Lump Sum: £1,000 + subsequent increments of £500Regular Savings: £100 per month

Ongoing Charge: 0.85%

Transaction Costs: Please refer to your platform or the latest fund EMT

Fund Price At Launch: 100p

Expected Return: An income yield of 4% with the potential for capital growth over a rolling 5 year period.

Distributions:Income: Quarterly from 31 October 2020 (Jan, Apr, Jul, Oct)Accumulation: Reinvested

Authorised Corporate Director (ACD): FundRock Partners Limited

Investment Manager and Distributor: Foresight Group

Launch Date: 15 June 2020

Final Accounting Date: 31st May

Interim Accounting Dates: Last day of February; 31st August and 30th November

Key Features


Appendices

29

FP FORESIGHT SUSTAINABLE REAL ESTATE SECURITIES FUND


Ten Principles of the UN Global Compact

30

By incorporating Global Compact principles into strategies and establishing a culture of integrity, companies are not only upholding their basic responsibilities to people and planet, but also setting the stage for long-term success.

Human Rights

1. Businesses should support and respect the protection of internationally proclaimed human rights; and

2. Business should ensure they are not complicit in human rights abuses.

Labour

3. Businesses should uphold freedom of association and the effective recognition of the right to collective bargaining;

4. The elimination of all forms of forced and compulsory labour;

5. The effective abolition of child labour; and

6. The elimination of discrimination in respect of employment and occupation.

Environment

7. Businesses should support a precautionary approach to environmental challenges;

8. Undertake initiatives to promote greater environmental responsibility; and

9. Encourage the development and diffusion of environmentally friendly technologies

Anti-Corruption 10. Businesses should work against corruption in all its forms, including extortion and bribery


Listed Real Estate as a Recovery Strategy

31

REITs have historically performed strongly following periods of market turmoil. Using the equity market low in 2002 following the Dot Com Bubble, the below charts display the outperformance of REITs vs equities in both the UK and the globally. REITs perform well in uncertain times.

REITs have historically outperformed equities after market falls

Source: Bloomberg. UK Equities = FTSE All Share TR Index & UK REITs = FTSE EPRA/NAREIT UK TR Index. Global Equities = FTSE All World TR Index & Global REITs = FTSE NAREIT Developed TR Index. All figures in GBP.

18%

UK REITs

18%

28%

UK Equities

26%

Global Equities

Global REITs


UK REITs UK Equities Global REITs Global Equities

21%

UK Equities

UK REITs

Global REITs

17%

23%

Global Equities 17%



Sector Overview: Logistics

32

Real Estate Characteristics

Typical Tenants

COVID-19/recession resilience

Investment rationale

• Warehouses of all sizes• Typically located near population hubs• Often modern and purpose built

• E-commerce retailers, such as Amazon, ASOS or Ocado• Logistics companies, such as FedEx, DHL and Royal Mail• Industrial manufacturing firms, such as Tesla and Bosch

• COVID-19 has accelerated the trend towards e-commerce• Tenant’s credit quality has improved• Value of supply chain reinforced, which should drive

investment

• Growth of e-commerce is increasing demand for the assets• High quality tenants with long leases, typically around 10

years• Assets are at the forefront of innovation, using robotics and

automation


Sector Overview: Data Centres & Communications

33


Typical Tenants



• Varying size depending on tenant needs• Assets are secure and pride themselves on high availability• Communications assets are towers and new micro-cells• Often located close to population hubs

• Cloud computing companies such as Microsoft and IBM• Network carriers such as T-Mobile and AT&T• Content providers such as Netflix and Spotify

• Tenants are sticky as moving data centre adds risks• Enforced lockdowns have seen data usage boom• Strong counterparties who operate in what are now

defensive industries

• The growth of cloud computing is a strong tailwind• Data usage is forecast to grow exponentially from 5G• Assets provide diversification to traditional real estate


Sector Overview: Offices & Government Property

34


Typical Tenants



• Modern and purpose built office space• Located in prime areas with strong economics• Favouring companies with best in class sustainability

credentials

• Government agencies• Large technology companies, such as Sony, Apple and IBM• Media companies such as Netflix and Disney

• US government is a is a strong counterparty• Favoured REITs have seen strong rent collection• Prime areas continue to be seen as strategically important to

tenants

• Prime building locations is a driver of value growth• Resilient tenant base, who are growing in credit quality• Shares trading at a discount to NAV


Sector Overview: Healthcare & Social Housing

35


Typical Tenants



• Varying property sizes from large hospitals to GP surgeries• Assets are built to a high specification • Occupancy levels are high, and leases are often inflation

linked

• Private operators, who are typically investment grade• Government operators, such as NHS Trusts

• COVID-19 has highlighted the criticality of these assets• Operators have been subject to government funded financial

support

• Strong growth drivers across multiple geographies• High occupancy and proportion of investment grade tenants• Provision of essential, long term health care services


Sector Overview: Self Storage

36


Typical Tenants



• Purpose built, multi-story assets• Emphasis on being located near roads for easy access• Emphasis on security

• A variety of individuals and business users• Tenants using for short term storage• Tenants using for long term storage or as a business base

• Trading in Q1 2020 had limited impact from COVID-19• Using storage becomes a money saving exercise for certain

businesses• Individuals and businesses typically look to downsize and

utilise storage

• Growth market, with the UK underserved compared to the US

• Sector has weather multiple downturns well, and performed well in a recessions

• Companies within the sector are well capitalized


Sector Overview: Forestry

37


Typical Tenants



• Sustainable timberlands• Forests are primarily located in North America• Emphasis on sustainability

• Forestry assets are owned on balance sheet• Cash generated by the sale of timber and seedlings• Cash flow supported by strength of construction markets

• Timber remains a key resource for construction• Construction has been deemed as essential work by most

governments, and so has been able to continue

• Forestry REITs have strong sustainability credentials• Companies are large and well established in markets where

scale is not easy to achieve• Historically strong dividend investments


Sector Overview: Commercial

38


Typical Tenants



• Real estate that is used for business purposes, such as industrial, manufacturing, trade stores and supermarkets

• Typically let on long, inflation linked leases• Often simple structures that can be repurposed

• Supermarket operators such as Tesco, Sainsbury’s and Lidl• Manufacturing firms such as Rolls-Royce• Trade stores such as Wickes and B&Q

• Assets are often mission critical to their tenants, and so there have been strong levels of rent collection

• Supermarkets have performed strongly through COVID-19• Tenants are typically of a high credit quality

• Long dated cash flows provide forecastable dividend streams• Inflation linkage in leases means that returns grow at a real

rate• Sector provides high and dependable dividend yields

For further information, please contact: Foresight Group LLP The Shard

32 London Bridge Street

London SE1 9SG

United Kingdom

t: +44 (0)20 3667 8100

e: [email protected]

w: foresightgroup.eu

investor presentation€¦ · benefits of listed real estate 14 no liquidity mis-match resilient...

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