Charter Hall's Earnings Keep Climbing While Rates Weigh on Its Rating

Record equity inflows and double-digit growth guidance have collided with rising bond yields, and a growing group of fund managers sees the gap as a chance to back a proven property cycle operator.

· 4 min read

A fund manager the market is pricing like a landlord

The thesis on Charter Hall has narrowed to a single tension: earnings are growing at double-digit rates while the market prices the group as though it were exposed to the full force of rising interest rates. In October, WaveStone Capital said the property funds manager looks increasingly attractive, arguing “the market continues to focus on cyclical macro headwinds while underappreciating the strength of the franchise.” A month earlier, Ten Cap described Charter Hall as its highest conviction move in property.

The market continues to focus on cyclical macro headwinds while underappreciating the strength of the franchise.

— WaveStone Capital, Article, October 2026

What makes the current debate notable is how far some managers have travelled. In December 2025, Ten Cap called the stock a sell, arguing that property trusts had benefited heavily from interest rate cuts and that valuation expansion was done. Phoenix Growth Fund largely exited around the same time after the share price doubled from its 2022 entry, and Atlas Funds Management said it would not be buying at those levels. The rate cycle these managers worried about has since arrived, and several now see it as the opening rather than the threat.

Growth that has not stalled

The operating record supports the bulls. Pendal Group reported in August that FY26 operating earnings per share grew 26.8 per cent to 103.2 cents, alongside record equity inflows of $6.7 billion, $17.1 billion of transaction activity and funds under management of $94.3 billion, which management expects to exceed $100 billion in FY27. Pendal added that early FY27 gross inflows were running about 30 per cent above the second-half pace, and that management is confident FY26's record fundraising can be repeated.

The reason the market reacted poorly was guidance. FY27 operating EPS guidance of 114 cents, up 10.5 per cent, came in about 1 per cent below expectations, according to Pendal, and below consensus of 12 per cent according to Perpetual Asset Management. Perpetual noted that management has historically been conservative with guidance, and Pengana Capital Group pointed out that Charter Hall had upgraded guidance three times during the prior year. SG Hiscock & Company highlighted in September that transaction markets and third-party capital remain supportive, citing a newly established $1.2 billion industrial partnership.

The countercyclical argument

Perpetual has made the clearest case for why weak property markets could favour Charter Hall rather than hurt it. While the company is not immune to rising rate expectations, Perpetual said “we believe that the company has a good history of being able to take advantage of weak property cycles.” As an active manager with a strong balance sheet, Charter Hall is expected by Perpetual to accumulate assets at depressed valuations, something the manager believes is not well understood by the market. Perpetual also described CEO David Harrison as one of the best property operators in Australia, with a track record of countercyclical moves.

We believe that the company has a good history of being able to take advantage of weak property cycles.

— Perpetual Asset Management, Monthly Report, August 2026

Ten Cap's September commentary framed the same opportunity through valuation. The manager noted the stock had derated about 40 per cent from its late-2025 high multiple to around 15 times earnings despite growing funds under management and delivering double-digit earnings growth. Crucially, Ten Cap distinguishes Charter Hall from pure duration plays: it is a fund manager where earnings rather than duration drive the outcome. With rates nearing a peak, Ten Cap said, “the disconnect between market pricing and earnings fundamentals in quality property stocks such as Charter Hall is compelling.”

Pengana echoed the theme in August, describing the recent de-ratings of Goodman Group and Charter Hall as creating more attractive entry points coupled with forecast earnings growth of around 10 per cent a year. Earlier in the year, Ten Cap increased its position in April citing supportive capital flows and improving investment demand, and Airlie Funds Management placed Charter Hall in its quality-on-sale basket of high-returning businesses it believes have been sold off aggressively.

The holdouts

Not every manager has been converted. Maple-Brown Abbott does not own the stock and noted in September that Charter Hall sold off on an outlook below consensus. Paradice Investment Management, which is overweight, acknowledged that guidance was not enough to support the share price and that the sharp rise in bond yields weighed on the sector. SG Hiscock also noted that the A-REIT sector's headline premium to net tangible assets of around 54 per cent is heavily influenced by fund managers including Charter Hall, a reminder that the market is paying for the platform rather than the bricks.

What managers are watching next

The checklist for FY27 is clear. Managers will watch whether equity inflows sustain the early-year pace Pendal described, whether funds under management crosses $100 billion as management expects, and whether Charter Hall uses the downturn to deploy capital at depressed values as Perpetual anticipates. The broader swing factor remains the rate outlook. Ten Cap's thesis depends on rates nearing a peak, while Wilson Asset Management's earlier observation that its dominant market position leaves Charter Hall well placed to deploy capital as the cycle progresses is the long-run version of the same bet.