IPD has launched a quarterly pan-European pooled property fund index exclusively capturing the investment performance of cross border funds.
The IPD Pan-European Property Fund Indices, published yesterday (March 21, 2011) with a seven-year quarterly history, consists of a small cohort of 18 European cross border pooled funds, worth an aggregate 11 billion, reflecting an estimated 82% of the total market. The sample comprises open-ended funds, utilizing RICS Red Book valuation methodology, or local best practice.
Excluded from the sample are German open-ended funds, also cross border in their investment strategies, as they are separately tracked in the IPD German Open Ended Fund Index, known as IPD OFIX.
"The significance of this new IPD indirect index is three-fold," explains Cameron McVean, Head of Fund Services at IPD. "Firstly, the IPD Pan-European Property Fund Indices deepens the transparency of underlying European property market performance, establishing a quarterly performance indicator of property performance in the major European markets.
"Secondly, it establishes a cross border benchmark for managers, providing a means by which to develop a more informed view of market performance when making peer group comparisons. Thirdly, this is the first-ever 'investable' pooled property fund indices for Europe, comprised exclusively of open-ended funds available for new investment a benchmark, until now, noted by its absence."
Further work is currently underway at IPD to provide a benchmarking service, and subsequent attribution analysis, for the direct property held by cross border pan-European investors and fund managers. The new benchmarking and performance analysis service will result in the formation of a quarterly pan-European direct property benchmark equivalent to the IPD Pan-European Property Fund Indices.
This new service will allow IPD to reconcile the performance differences between cross border pan-European direct and indirect performance accounting for manager fees, leverage and fund costs as well as investment styles.
Ivo deWit, Global Portfolio Manager at CBRE Investors, said: "IPD pan-European Property Fund Indices is a representative group of the core-balanced/specialist pan-European funds that the multi-manager industry can access, it is also available comparatively soon after the quarter end two months after close of quarter making it very useful for client reporting and benchmarking."
McVean added: "For these new benchmarks to be fully established across the market, we are reliant on the continued support and demand from our clients for this type of analysis."
European cross border pooled property funds delivered an annual euro-denominated total return of 5.0% over 2010, compared to 2009‟s -17.2%, as measured by the new IPD Pan-European Property Fund Indices.
The past performance data shows that, European cross border funds resumed positive quarterly growth in Q2 2010, following nine consecutive quarters of negative returns the height of the losses came in the final quarter of 2008, consistent with when UK pooled fund suffered greatest losses, when funds delivered -10.0%. The fourth quarter 2010 total return of 2.4% is the largest quarterly return since the second quarter of 2007.
Pan-European balanced funds outperformed their specialist vehicles, with annual returns of 5.4% and 4.8%, respectively. Balanced funds hold a greater exposure than specialist funds to the Benelux property markets, France and Nordic markets, while holding shallower positions in CEE markets and Germany in particular. Balanced funds are office-dominated by sector, compared to an industrial bias for specialist funds.