Interesting numbers out last week from Daniel Salter, Head of Equity Strategy at Renaissance Capital.

He’s been looking at returns for August for EM and frontier markets. Overall EM equities lagged, up just 2.1%, but excluding China +5.6%, EM ex-China was actually down, -0.4% over the month. Within that, EM Asia outperformed, +3.1%, followed by EMEA +1.3% and Latin America lagging -6.4%.

Bottom line – Asia continues to pull ahead of the rest of the EM pack!

“Within EM, and despite the weaning dollar, it was ‘lower risk’ (and currency pegged) countries tending to outperform (e.g. UAE +7.5%, China +5.6%, Saudi Arabia +4.9%, Czech +4.6%, Poland +4.1%, Qatar +3.6%, India +3.4%, Indonesia +2.4%, Korea +2.1%) with ‘riskier’ countries underperforming (e.g. Brazil -9.0%, Turkey -8.4%, Argentina -1.4% and South Africa -1.3% all down).”

“Frontier Markets having lagged significantly in the rally to date have at last started to perform, +7.9% with index heavyweights, Kuwait +7.9% and Vietnam +7.7% both showing index like returns (the two make up 54% of MSCI FM). South Asia in general appears to be capturing some interest: India (+3.4%) and Pakistan (+2.8%) both outperformed EM (+2.1%) while Bangladesh (+21.9%) and Sri Lanka (+17.3%) both outperformed FM (+7.9%).”

Within EM, ‘safer’ (and tech-heavy) China and Taiwan are both above their 1Q pre-COVID highs, with Korea just 3.7% away.

At the other extreme, Colombia, Brazil, Turkey, Greece, Mexico, Hungary, Russia and Chile would all have to rally 40-80% to regain their 1Q peaks. Russia looking very cheap on current metrics.

Homes for the Homeless

Monday brought news of a proposed new social impact social housing fund called Home REIT plc which has announced its intention to float on the premium segment of the main market of London Stock Exchange, targeting to raise £250 million to contribute to the alleviation of homelessness in the UK, whilst targeting inflation-protected income and capital returns, by investing in a diversified portfolio of assets across the UK which will be dedicated to providing accommodation to the homeless.

Here’s some detailed information on the fund…I’ll dig around and then share some thoughts on the IPO next week.

“The accommodation assets will be let or pre-let on very long (typically 20 to 30 years), inflation-linked leases to registered charities, housing associations, community interest companies and other regulated organisations which have a proven operating track record in providing low-cost accommodation to the homeless and which receive housing benefit or comparable support from local or central government to fund the provision of such accommodation to the homeless.

OVERVIEW

• “Investment strategy is to be part of the solution to the homelessness crisis in the UK whilst delivering inflation-protected income and capital growth over the medium term for shareholders through funding the acquisition and creation of high-quality accommodation for the homeless across the UK let on long-term index-linked leases.
• Targeting a diversified portfolio of homeless accommodation assets, let or pre-let to registered charities, housing associations, community interest companies and other regulated organisations that receive housing benefit or comparable funding from local or central government, on very long-term and index-linked leases.
• Targeting a wide range of assets across various sub-sectors within homelessness including women fleeing domestic violence, people leaving prison, individuals suffering from mental health or drug and alcohol issues and foster care leavers.
• Focus on training and rehabilitation within the homeless accommodation assets to provide individuals with the skills and confidence to find long-term accommodation and enable them to reintegrate back into society.
• Alvarium Home REIT Advisors is proud to be working in collaboration with Crisis to help support Crisis in ending homelessness.
• 320,000+ people sleeping rough, in homeless shelters or other temporary housing in Great Britain (Shelter, November 2018).
• Home REIT will seek to acquire or create new accommodation for the homeless, creating new asset supply to meet significant demand.
• Expected savings to local authorities and other providers of accommodation to the homeless via lower rents versus more expensive alternative accommodation.
• The homeless accommodation assets are expected to give providers of homeless accommodation long-term security of tenure, which the Investment Adviser believes is crucial to rehabilitating vulnerable individuals and helping to break the cycle of homelessness seen in short term accommodation.
• Focus on well-located properties that provide a sustainable level of rent for the tenant.
• Ability to invest in fixed-price forward funded pre-let developments is expected to help deliver lower purchase costs and discount to built value (but no speculative development by the Company).
• Very long lease terms of typically 20 to 30 years.
• Assets acquired by the Company will benefit from triple net, full repairing and insuring leases.
• Annual lease rent reviews directly linked to inflation and upward-only.
• Targeting a minimum annual dividend of 5.5 pence per Ordinary Share2, starting from the financial period commencing 1 September 2021, with the potential to grow through upward-only inflation-protected long-term lease agreements.
• Targeting net total shareholder return of at least 7.5 per cent. per annum2 over the medium term.
• The Company intends to enhance equity returns by using a conservative level of aggregate borrowings with a maximum level of aggregate borrowings of 35 per cent. of the Company’s gross assets at the time of drawdown of the relevant borrowings.
• Substantial pipeline of homeless accommodation assets already identified with an aggregate value of over £350 million which meet the Company’s investment objective and investment policy. All of these assets have been identified off-market through the Investment Adviser’s extensive contacts and relationships and are under exclusivity.
• Net proceeds of the Issue (“Net Issue Proceeds”) expected to be invested or committed within six to nine months following Admission.
• Experienced investment team:
• Alvarium Home REIT Advisers, established by Alvarium Investments which has approximately US$7 billion of real estate assets under management.
• The team has capitalised and transacted over £1.5 billion of property assets with a particular focus on accessing secure, long-let and index-linked UK real estate through forward funding and built asset structures.
• The Investment Adviser’s personnel have extensive expertise in the target homeless accommodation assets sector and have successfully managed a £430 million social impact fund specialising in this strategy over the last two years.”