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Picton Property Income
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== Consistently positive portfolio returns == The key driver of Picton’s performance has been the consistently strong property portfolio return, measured before the impact of gearing or non-property costs. The company has outperformed the MSCI Quarterly Property Index for the past nine years and produced an upper-quartile performance over three, five and 10 years and since inception. The FY22 total return of 24.3% compared with 19.6% for the market was only marginally outside the upper-quartile return starting at 24.9%. Exhibit 6 also demonstrates the relative stability of property income returns over the longer term. '''Exhibit 5: Total property return versus index<ref>Source: Picton Property Income, MSCI. Note: Data to 31 March 2022. *Annualised percentage returns.</ref>''' [[File:Image4-52de7bc6e28f87a993f10ce7bdecf5f5.png|600x600px]]'''Exhibit 6: Property income return versus index<ref>Source: Picton Property Income, MSCI. Note: Data to 31 March 2022. *Annualised percentage returns.</ref>''' [[File:Image5-78e4a071afa96198ee901fe5eccdcfbb.png|600x600px]] Among the factors supporting this strong performance, Edison Investment Research notes: * Successful asset management underpinned by the group’s occupier focus whereby it seeks to work closely with tenants to understand their needs, enhance occupancy, improve retention and maximise income. Reflecting the market-wide “flight to quality” in the office sector in particular, portfolio investment has been stepped up, reaching £9.6m in FY22 compared with an average £5.1m pa in the preceding three years. The FY22 investment was principally across eight key projects, all aimed at enhancing space to attract occupiers, improve sustainability credentials, and grow income. * Although Picton maintains a diversified portfolio its unconstrained approach to portfolio construction has enabled it to make strategic adaptations to sector and asset positioning in response to changing market conditions. The significant weighting to the industrial property sector (60%) and a highly selective exposure to the retail property sector (65% of the retail total) continues to benefit performance. The evolution of Picton’s portfolio positioning over time can be seen in Exhibit 7. '''Exhibit 7: Sector positioning through time<ref>Source: Picton Property Income data.</ref>''' [[File:Image6-6c528c8320b7a2e6d07b8b546f9ef798.png|600x600px]] Picton’s approach to buying and selling assets is predominantly opportunistic and driven by asset rather than sector selection. Significant transactional activity in recent years reflects capital recycling and other strategic portfolio changes. During FY14–17 Picton took advantage of positive market conditions (increasing rents and rising valuations) to significantly grow and reposition the portfolio. This included the disposal of central London assets and other non-core properties, deliberately increasing the average lot size while reducing gearing. Ahead of the pandemic, Picton was a net seller of assets, reducing an already low high street retail exposure and further reducing gearing. Taking advantage of the market recovery, in FY22 (and FY23 year to date) it has been a net buyer and continues to monitor further opportunities across all market sectors. '''Exhibit 8: Opportunistic approach to acquisitions and disposals overlaid with strategic positioning<ref>Source: Picton Property Income data.</ref>''' [[File:Image7-69ee5a6f7d85e068105926e2d4e40e66.png|600x600px]]
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