By Mark Maloney, Managing Director, Gibraltar Asset Management

Last year was a good year for shares, with the start and middle period faring better than the end period, as confidence that inflation and interest rates were heading decisively lower began to diminish. But with the re-election of Donald Trump and the direction of travel for interest rates still remaining down, we see stock markets returning close to their longterm averages of 10% over the next twelve months. We continue to favour perceived beneficiaries of this political and economic environment such as energy, financials, utilities and real estate.

The stock market remains at overweight

We expect the economy to continue expanding in 2025, remaining on a growth path that is supported by low unemployment, strong corporate earnings and an economy bolstered by above-trend government spending. The key, as usual, will be consumer spending, which accounts for approximately two-thirds of overall GDP. At this juncture, the consumer is bolstered by low unemployment, standing at just 4.3%. New academic research indicates that full employment is consistent with a 4.3% unemployment rate. Inflation is steadily falling towards its 2% target and interest rates are set to fall further. If rates do continue to head lower on mild inflation news, while earnings growth accelerates, then this new bull market should have more years to run.

Popular Wall Street wisdom states that the best outcome in Washington is gridlock. Yet the US market has outperformed in years in which one party controls presidency, House, and Senate. And the market does best when the GOP is in control. Interestingly, the US stock market is not looking overly expensive, even at these elevated levels. The current forward P/E ratio for the S&P 500 is 21 times, within the normal range of 15-24x. The ratio of the S&P 500 price to an ounce of gold is now 2.3, within the historical range of 1 to 3.

VIX

The VIX Volatility Index tended to trade in the 20 or above range for most of the 2020-22 period, as investors navigated the pandemic, the supply-chain crisis, and spiking inflation. Outside of a spike to the high 30s in August, the VIX has been below 20 for most of 2024. The index is currently 16. The reduction in VIX is consistent with bull markets, which tend to be periods of reduced market volatility.

When we examine the risks, we note that some of the old risks are fading away. These include supply chain, inflation, Russia, recession, and restrictive central bank policy. A lingering concern is inflation, as eliminating the final percentage point of inflation on the way to the 2% target is always challenging. China is a risk from both an economic and geopolitical perspective. The economic risk occurs if this massive market remains stuck in the malaise that has existed since the zerotolerance Covid lockdowns. The geopolitical risk occurs if the government decides to distract from economic struggles by attacking Taiwan. Finally, investor complacency and the absence of fear are a risk. When the market is complacent, VIX is low, and investors are fully invested, an extraneous event – geopolitical or economic – can spur a pendulum swing to fear and panic, and a market selloff. On balance, the current level of the VIX suggests that investors are comfortable with the balance of risk and reward in the market.

Tritax Big Box REIT plc

This investment trust, listed on the LSE (BBOX.L), is a leading investor in UK largescale logistics assets (“Big Box”). These are a critical component of modern supply chains. As such, Tritax offers a compelling investment case for those seeking exposure to the growth in e-commerce and logistics while benefiting from stable, inflation-linked income. Its high-quality portfolio, long leases, and strong tenant base provide a balance of growth and security, making it a potential cornerstone for income-focused and longterm investors.

Its portfolio is valued at £6.4bn, making it the largest such UK enterprise of its kind. This scale offers the potential for lower cost of capital, improved share liquidity and an enhanced credit rating and puts the trust on the cusp of FTSE 100 inclusion. The assets are typically modern, in prime locations and fully let on long leases (an average of 14 years) to institutional-grade tenants with upward-only rent reviews. Customers include some of the biggest names in business such as Amazon, Morrisons, Co-op, B&Q, Tesco, Argos, Ocado, M&S and Currys. The company’s portfolio includes state-of-the-art logistics facilities located near key transport networks, such as motorways, ports, and urban areas, which are critical for last-mile delivery. These prime assets are difficult to replicate, providing competitive advantages.

The continued rise of online shopping

The structural drivers of demand for “Big Box” assets are compelling and, combined with a significant element of inflation linkage, should continue to provide scope for rental growth. The business’s exceptional portfolio is well positioned to take advantage of the changing dynamics in the logistics market, in particular technical innovation in the form of e-commerce. The continued rise of online shopping drives demand for logistics and warehousing facilities. Companies like Amazon, Tesco, and Ocado rely on such strategically located distribution hubs.

Modern, strategically located Big Boxes can provide companies with the nucleus for effective distribution to other parts of their supply chain. By centralising previously dispersed distribution into fewer, larger facilities, occupiers can optimise staff and stock management, capture economies of scale, reduce costs and improve delivery times. Tritax is committed to Environmental, Social, and Governance (ESG) initiatives, such as developing energy-efficient buildings and promoting carbon reduction, making it appealing to ESG-conscious investors.

The REIT has performed well since its launch in December 2013, with an annualised NAV total return of 7.7%. Despite market volatility, Tritax has shown resilience with a strong balance sheet, high occupancy rates, and consistent rental growth. Its diversified tenant mix reduces reliance on any single sector or client.

Like many property trusts, Tritax has traded at a discount to NAV for much of its history. However, the fund has dramatically de-rated as of late and its shares now trade at a 27% discount to NAV (vs a 12-month average of 16%), which we believe makes this a very attractive entry point. Further falls in interest rates will surely help to narrow this discount. With a 5.5% dividend to boot, we rate the shares a strong buy

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With Listing Members now signed up and approved, and listing applications being filed with GSX Limited (GSX), interest is turning towards the listing process itself. What are the benefits and how does the listing process work?

GSX was granted its authorisation to commence its operations as Gibraltar’s first ever regulated stock exchange on the 10th October 2014 with the listings business expected to commence during the first quarter of 2015. GSX currently operates as a listing only exchange for open-ended funds that are licensed, registered, authorised and/or regulated as a Collective Investment Scheme (CIS) by a competent authority empowered to supervise financial services in a GSX recognised State. To that end, GSX is a regulated exchange that operates in many ways as a European fund distribution platform. Some allocators are restricted from investing a % of a fund or clients assets in vehicles that are un-regulated or unlisted and GSX provides a straightforward solution to a European listing option for a fund. Similarly, a listing can form an important part of any investors due diligence process on a fund and the approval of a regulated exchange, support from a Listing Member (or ‘sponsor’), and approval from the listing authority can provide a strong message to potential investors.

GSX offers a simple, cost effective, and professional listing option for a fund in a European jurisdiction. In the most recent independent Global Financial Centres Index (16th Edition) Gibraltar ranked higher than the Cayman Islands, Malta, the Isle of Man or Jersey as a Financial Centre.

The advantages of a GSX listing

GSX provides a secure platform for investors and managers to come together, and it delivers a reliable, fast to market, and cost effective service that enables applicants to market to investors looking for greater transparency and visibility through an EU listing.

The GSX portal allows investors to filter their searches by individual or multiple criteria in order to identify their preferred choice of investments including geography, asset class, manager, and currency.

Over time, GSX plans to adopt a graduated progression to a full service stock exchange providing trading and execution services across a wide range of products, but not limited to debt and equities.

Listing of open-ended collective investment schemes: need to know

Other than the conditions specified in the CIS Code, the following general conditions must be met for those wishing to apply for listing:

^l An applicant must be duly incorporated or otherwise validly established according to the relevant laws of its place of incorporation or establishment of a GSX Recognised State, and must operate in conformity with its Constitutive Documents.

^l An applicant must be an Open-Ended Fund and must be regulated by the Competent Authority of a GSX Recognised State or be otherwise acceptable to GSX Limited and the Listing Authority.

^l An applicant must have audited accounts for the last financial year.

^l An applicant may not change its principal investment objectives and policies as set out in its Listing Particulars unless the consent of the unit-holders representing a majority of the Units of the applicant that are in issue has been obtained in advance.

^l An applicant must not be permitted to issue bearer shares and/or Units under its constituting documents.

^l The applicant must satisfy GSX and the Listing Authority that its Controllers together with any appointed investment manager have sufficient and satisfactory experience in the management of investments of the type in which the applicant intends to invest, or currently invests.

^l The Controllers of the applicant must be able to demonstrate their ability to act independently of any appointed investment manager of the applicant.

^l The aggregate market value of the Units of an applicant must be at least €1,000,000 or the foreign currency equivalent within 12 months of the applicant’s launch if the applicant is a new Fund, or above €1,000,000 if the Fund has been active for more than 12 months.

^l Once listed, an applicant must continue to comply with all requirements of the CIS Code.

Application process: an outline

Typically, the fund will select a Listing Member (who are approved by GSX, and listed on the GSX website). The Listing Member will manage the application process adhering to the application for admission to listing set down in the CIS Code.

The Listing Member is then responsible for dealing with GSX on all matters relating to the listing application and will work closely with their advisors and the applicant in preparing the applicant for listing. The Listing Member will also work with the applicant post-listing in ensuring that the applicant is aware of and adheres to its continuing obligations, fulfilling its regulatory responsibilities.

The applicant will require that its Listing Particulars comply with the GSX requirements. This will involve the disclosure of detailed information relating to the fund and its business, including the fund’s controller names and contact information, its location, legal status, investment strategy and assets under management.

Once an application has been completed and submitted, membership is then considered by GSX’s Membership Committee. Documents that need to be submitted include the application for the listing, as well as a completed checklist, and the listing particulars which will need to be compliant with the Listing Code. Once the application is completed, GSX will then consider the application and, once approved, deliver this to the Listing Authority.

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