Jyske Invest Global Real Estate Equities

Market Comments, Q4 2011

A year with many macroeconomic events.

Review

The fund generated a return of 8.89% for Q4 against a benchmark return of 10.78%. The positive return in the quarter was primarily driven by the US real-estate companies. For the full 2011, the fund generated a return of -7.52%; the benchmark return was -3.33%. The fund was outperformed by the market primarily due to the fund’s exposure to Brazil and its lower exposure to Canada compared to the market.

A string of major negative macroeconomic events left its mark on equity prices in the equity markets in 2011. The year began with turmoil and revolutions in North Africa and the Middle East, resulting in surging oil prices. The situation was followed by earthquake and nuclear disaster in Japan, which had temporary – yet forceful – negative implications on the global supply chain.

The US real-estate companies account for a large proportion of the global real-estate market, and this market got off to a good start to 2011. The reason was primarily a combination of low interest rates, an improvement of the US economy and more investor focus on particularly the REIT companies. In Q3, focus was once again on the US debt problems, resulting in rather significant price declines for the real-estate companies. At the end of the year, focus was moved from the US to Europe and better economic indicators were also announced from the US. These factors contributed to the fact that investors decided to look to the US real-estate companies, which closed the year with an excellent performance.

Outlook

We believe that the real-estate equity market has a fair valuation. We do not believe that the economies will slide into recession again since the leading central banks and governments are paying much attention to the potentially disastrous consequences of this. If the current market situation, particularly in the US, continues with low interest rates and moderate economic growth, this may have a positive impact on the share price.

Given fair valuations and continued advance in earnings, we believe that there will be room for price increases. However, we also expect the extraordinarily large market fluctuations to persist due to considerable elements of uncertainty.

The markets will be affected by the current doubts among investors. The concerns are related to the direction of the economies and the extent of it.

If growth in Europe, Japan and the US rises significantly, the central banks will raise interest rates. Offhand, this would be negative for the real-estate companies due to the rather capital-intensive business model. If growth, on the other hand, slows down this may result in rising unemployment and limited financing opportunities, which will have a negative impact on real-estate companies. Real-estate companies depend very much on the liquidity in the market and the price of capital. Hence, particularly rising long-term yields will have a negative impact on the companies’ financing costs.

Please note

Past performance is not a reliable indicator of future results. The value of and return on your investment may fall, and you may not get back the full amount invested. The fact that the fund focuses on a single sector rather than a wide range of sectors implies considerable risk. There is a risk that the high valuations seen these past few years may lead to a loss in the short term. An initial charge is usually made when you purchase and sell units. The fund may invest in instruments denominated in various currencies. You should be aware that changes in exchange rates may have an adverse effect on your investment. This may also be the case if EUR is not your base currency.

Information in this text should not be regarded as investment advice, and investors should consult their own investment and tax advisers before buying or selling.