While German open-ended real estate funds as a whole returned 0.1% in February, returns on funds with a global focus dropped to -0.4%. This drop was mainly caused by weak returns from those funds which are in liquidation. These results are taken from the recently published OFIX-monthly report for February 2012 by IPD Investment Property Databank GmbH.
Poorly performing funds pull down the index
"The gap between the good and poor-performing funds is widening," says Sebastian Gläsner, Head of Fund Services at IPD in Germany.
"The six funds in the OFIX index that have gone into liquidation returned -0.5% in the last three months. The period of weak returns within this fund group began in mid-2009. This means that the positive returns of the previous seven years have been eroded in the last 24 months."
While the overall index has risen from 100 in December 2005 to 120.5 in February 2012, the index value of funds in liquidation currently stands at 100.8. The KanAm grundinvest Fonds, which recently went into liquidation, is the exception in this group, being the only one of the six funds that has not seen negative returns during the period either over the short or longer term.
Those funds which are now in liquidation (as of March 16, 2012) have a total volume of 10.3 billion. After growing steadily between 2005 and 2008 to reach 15.4 billion, this represents a decline of about one third. It should be noted that the Degi funds and the Morgan Stanley P2 Value fund in particular have recorded sharp declines.
Despite the fact that the KanAm grundinvest Fonds and AXA Immoselect are the largest funds in liquidation and therefore dominate the sample in terms of value, it was the very low return on the P2 Value fund in February 2012 that pushed the OFIX Global Index into decline. The impact of this fund, which has a NAV of around 700 million relatively small for a German open-ended fund was to pull down the sub-index by 0.35 percentage points, as a result of its monthly return of -4.5%.
"IPD's OFIX index and its measurement of the performance of indirect investments allows for detailed analysis of the German open-ended funds, which at 75 billion NAV represents a very important part of the property market," says Daniel Piazolo, Managing Director at IPD Investment Property Databank GmbH.
"The latest OFIX figures reveal that open-ended funds with a global focus have achieved an annualized return of 1.5% over the last five years, while those funds with a focus on Germany have achieved 2.9% per year, almost twice as high."