With the equity market dominated by interim reports, Carnegie Småbolagsfond lost 0.7 percent this month. The fund’s real estate exposure was again pleasing, with Hufvudstaden, Fabege and AtriumLjungberg all listing significant gains.

All delivered fine quarterly reports, with rental income and net asset values both rising, but the biggest factor driving the attraction to this sector is falling interest rates. Most maturities are showing new record lows, and negative interest is the rule rather than the exception, even for long-term rates. This is a whole topic in itself, and we find that many investors are desperately seeking returns, with property as an asset class still providing one. We therefore anticipate continued interest, resulting in a falling required return and higher property values.

We have primarily chosen high-quality office exposure in Stockholm as we see a fairly low risk and high interest from institutional investors in the direct market. Our largest holding in the sector, AtriumLjungberg, is still traded at a significant discount to its net asset value.

Peab, our holding in the construction sector, was once again the most brilliant star in the sector and presented a quarterly report that was high quality on almost all points. The profitability of the building operations is good and the housing development arm is not showing the signs of weakness that many of its competitors are struggling with. A very well managed company.

After a large sale of forest land to AMF Pension in June, resulting in a positive share price reaction, it was time in July for BillerudKorsnäs to report its results for the second quarter of the year, but profits fell short of expectations. Last year was tough for the company, with disappointing earnings, so it was pleasing when BillerudKorsnäs began 2019 well in terms of earnings, and the long-awaited forest deal was concluded well. In light of this, it is sad to review a quarterly report that shows unsatisfactory profitability. We have reduced our holding. The share lost 9 percent in July.