UK quarterly pooled fund returns slowed to just 2.0% over the three months to September, as measured by the IPD UK Pooled Property Fund Indices (PPFI). This compares to 2.2% by the direct market.
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Source: IPD UK PPFI
Over the third quarter, balanced and specialist funds delivered 1.9% and 2.3%, respectively. Across the 60-strong fund constituents, all but five funds delivered a positive return for the quarter ranging from -8.4% to 9.7%.
All pooled fund returns for Q3 were down significantly on the strong 10.4% performance delivered at the top end of the recent recovery in Q4 2009.
"The slowdown in quarterly returns reflects uncertainty in direct property markets and the ineffectual role of leverage in a flat market," explains Phil Tily, UK Managing Director at IPD.
"Uncertainty has built up ahead of the Comprehensive Spending Review, which could tip the UK economy into a double-dip recession. If this does happen, there are consequences for pooled fund investors: lower returns, which, if negative, would be exacerbated by leverage."
Annual returns to Q3 2010
On a rolling annual basis to the end of September 2010, fund performance remains in strong territory owing to the remarkable bounce back in the final quarter of 2009. All pooled funds returned 23.4% over the 12-month period, while the direct property market delivered 22.6%, as measured by the IPD UK Monthly Index.
Specialist funds, which adopt niche investment strategies and apply higher levels leverage, again delivered the highest annual rolling return at 30.2%, outperforming the direct market by 760 basis points, while balanced funds returned more than 11 percentage points lower that specialist funds, at 18.8%.
Tily adds: "Specialist funds have outperformed the all pooled funds average and direct property markets for the last four consecutive quarters. Over that 12-month period, however, the spread of performance between balanced and specialist funds has narrowed with performance becoming more aligned with the underlying market."
The IPD UK PPFI sponsored by The Association of Real Estate Funds (AREF), Linklaters and Property Match is comprised of 26 balanced and 34 Specialist quarterly-valued funds, with a combined net asset value of £27.1 bln. at September 2010.
Source: IPD
All pooled fund returns for Q3 were down significantly on the strong 10.4% performance delivered at the top end of the recent recovery in Q4 2009.
"The slowdown in quarterly returns reflects uncertainty in direct property markets and the ineffectual role of leverage in a flat market," explains Phil Tily, UK Managing Director at IPD.
"Uncertainty has built up ahead of the Comprehensive Spending Review, which could tip the UK economy into a double-dip recession. If this does happen, there are consequences for pooled fund investors: lower returns, which, if negative, would be exacerbated by leverage."
Annual returns to Q3 2010
On a rolling annual basis to the end of September 2010, fund performance remains in strong territory owing to the remarkable bounce back in the final quarter of 2009. All pooled funds returned 23.4% over the 12-month period, while the direct property market delivered 22.6%, as measured by the IPD UK Monthly Index.
Specialist funds, which adopt niche investment strategies and apply higher levels leverage, again delivered the highest annual rolling return at 30.2%, outperforming the direct market by 760 basis points, while balanced funds returned more than 11 percentage points lower that specialist funds, at 18.8%.
Tily adds: "Specialist funds have outperformed the all pooled funds average and direct property markets for the last four consecutive quarters. Over that 12-month period, however, the spread of performance between balanced and specialist funds has narrowed with performance becoming more aligned with the underlying market."
The IPD UK PPFI sponsored by The Association of Real Estate Funds (AREF), Linklaters and Property Match is comprised of 26 balanced and 34 Specialist quarterly-valued funds, with a combined net asset value of £27.1 bln. at September 2010.
Source: IPD
