"The global COVID-19 pandemic presents extraordinary health challenges and unprecedented economic risk due to reduced investment and consumption, but I believe Fidelity® International Real Estate Fund (FIREX) is positioned to weather the challenges we've seen in early 2020," says Portfolio Manager Guillermo de Las Casas. Risk mitigation has been an important part of de Las Casas's strategy since he began managing the fund in 2010, he notes, explaining that the fund has outperformed its benchmark, on average, in periods when the market is in the red.
He cites continued risks to the real estate sector amid financial hardships faced by malls, hotels, senior living facilities, airports, and the student housing segment.
Despite potential hardships spilling into the Continental European rental residential sector, high levels of socio-economic safety nets in Germany and Scandinavia have mitigated significant earnings erosion from the pandemic in those regions, he says.
Logistics and self-storage also have shown resilience, and even growth. Because of the pandemic, governments are realizing how vital logistics networks are to the outright safety of the population. These sectors have continued to see strong demand from e-commerce and health care services to mitigate the losses in the high street, de Las Casas says.
For this reason, he has positioned the fund in residential, logistics, and self-storage real estate companies with relatively strong balance sheets because he thinks they could be well-positioned throughout the pandemic and when the economy eventually recovers.
"I've also sought to invest in real estate firms with earnings I think are relatively resilient, while keeping an eye on companies that are mispriced for the longer term," he says.
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