The Fidelity International Real Estate Fund focuses on identifying companies with robust business models driven by long-term growth, rather than short-term market fluctuations. In the final quarter of 2025, the fund's Retail Class shares saw a 2.14% increase, a performance that surpassed the international real estate sector index but did not quite match the 4.89% rise of the broader MSCI EAFE Index. The fund's strategic adjustments included a notable reduction in its exposure to Australia and a forward-looking commitment to exploring how artificial intelligence can be integrated into real estate strategies and operations.
Global real estate markets experienced a positive trend, with international real estate stocks gaining 1.54%, as measured by the FTSE® EPRA SM /NAREIT® Developed ex North America index. This uplift was largely influenced by the U.S. Federal Reserve's interest rate cuts and a widespread rally across global equities, creating a favorable environment for real estate investments. Within this context, the fund managers at Fidelity International Real Estate continued to apply their disciplined approach, prioritizing companies with strong fundamentals and sustainable growth prospects.
A significant event impacting the fund's holdings was the 19% surge in National Storage REIT shares. This increase followed a takeover bid from a consortium involving Brookfield Asset Management and Singapore's GIC, highlighting the dynamic nature of the real estate investment landscape. Such corporate actions often present both opportunities and challenges for fund managers, requiring careful assessment of potential impacts on portfolio performance and risk exposure.
Strategically, the Fidelity International Real Estate Fund made deliberate decisions regarding its geographic allocation. By the close of 2025, the fund had reduced its holdings in Australia, making it the largest country underweight compared to its benchmark. This move reflects the managers' ongoing evaluation of market conditions and their proactive management of the portfolio to align with their long-term investment philosophy. Additionally, the fund is set to intensify its research into the application of AI within the real estate sector, aiming to identify innovative companies that are leveraging technology to enhance efficiency and create value.
Overall, the Fidelity International Real Estate Fund navigated the fourth quarter of 2025 with a clear strategy, focusing on resilient business models and adapting to market shifts while keeping an eye on emerging technological trends that could redefine the future of real estate. The fund's performance and strategic decisions underscore a commitment to identifying and investing in high-quality assets that promise sustained value creation for its investors.