Company: PGZ
Filing Date: 2025-07-03
Form Type: N-CSRS
Source: 0001398344-25-012685
Chunk: 4

Company: Principal Real Estate Income Fund
Filing Date: 2025-07-03
Form: N-CSRS
Chunk 4
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 and falling bond yields. April
brought further volatility following tariff announcements, but a subsequent reprieve helped markets stabilize.

Regionally, Asia-Pacific (“APAC”) was
buoyed by strength in Japanese developers which benefitted from news of an activist investor taking a position in one of the developers.
In addition, rate sensitive stocks like Japanese REITs outperformed. Europe stocks were supported by Swiss REITs benefiting from expected
central bank rate cuts and while cyclical names led on the back of fiscal stimulus plans. A weakening USD helped bolster returns of stocks
outside the U.S. Within the Americas, defensive sectors such as healthcare, net lease and towers led whilst cyclical property types such
as office and hospitality trailed.

CMBS

The CMBS holdings within the Fund returned 5.16% for
the 6 months ending April 30, 2025. This compares to the return of the Bloomberg US CMBS 2.0 BBB of 5.18%. The main drivers of returns
for the period were discounts getting smaller for bonds originally rated BBB and BB from seasoned deals issued in 2012-2014, better demand
for bonds issued between 2019-2021, the yield curve steepening and the strong carry and positive relative spread performance of interest
only securities. Pricing on seasoned credit exposure in the portfolio also benefited from the outlook for the resolution of 2012-13 vintage
loans improving as more loans were extended during the period. The price action reflects clarity on how these defaulted loans would be
resolved and a higher probability that these loans can eventually be resolved with lower losses than were previous expected. Bonds issued
between 2019-2021 have been trading and material discounts to recent new issue deals due to low coupons and concerns of loans refinancing
at maturity. Spreads outperformed new issue as higher yields on the earlier vintage deals has attracted demand while fundamental performance
during the terms of the loans has been good. The steepening of the yield curve helped the performance of seasoned deals as yields on 2yr
and 5yr treasuries ended the period 0.57% and 0.43% lower compared to 10yr treasuries ending 0.12% lower. Positive performance in the
portfolio also came from exposure to interest only loans that are structurally protected from initial loan defaults and benefit from loans
not being able to refinance and extending.

GLOBAL REAL ESTATE SECURITIES

The global real estate securities