The real estate sector of the SA unit trust industry is a sizeable R64.6bn, substantially larger than sectors such as small caps, industrials, financials and resources. It is almost the same size as the global asset allocation sector.

Property funds have been an easy sell: they usually provide a starting yield higher than sovereign bonds, and they have a built-in rental escalation of 8%. Property was the strongest asset class up to the end of 2017, until financial engineering spoilt the party. Instead of clean rental income, some real estate investment trusts (Reits) started to pay profits made on investment banking activities such as foreign currency trading, and they often bought properties because they knew there was a ready pool of investors to provide costly equity funding...

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