MSCI Inc. recorded that Pan-Europe property funds delivered a net fund return of 0.4% Q1 2016, as indicated in the IPD Pan-Europe Quarterly Property Fund Index.
This is a decline from a total return of 2.8% recorded in the previous quarter and 3.3% recorded in the first quarter of 2015. The property market, in line with other assets, was affected by the volatility and uncertainties that marked the year’s beginning; and it signalled a moderation in the Index after several quarters of robust returns. Nevertheless, the IPD Pan-Europe Property Fund Index outperformed equities and property equities (Equities, -4.8%; property equities, 0%); establishing the strength of real estate asset class in times of uncertainty.
Underlying assets held in these funds recorded a similar slowdown. Direct asset-level return moderated to 0.5% in the quarter to March 2016, down from 2.9% in December 2015 and 3.9% in March 2015. Capital value growth turned negative for the first time in two years, registering -0.8% in Q1 2016; although the balanced funds sub-sample fared better as capital value held its position.
Over the 12-month period ending in March 2016, the IPD Pan-Europe Quarterly Property Fund Index recorded a total return of 10.4%. This is a marked slowdown from 13.5% recorded for the same period ending in December 2015 and was the lowest since June 2014.
Bert Teuben, vice president, MSCI, commented: “2016 began with much volatility in the markets. As a result, many asset classes experienced a slowdown in the first quarter. And to a large degree, the Index basically moderated after several quarters of very robust returns.
“The slowdown in commercial real estate in the first quarter was recorded across all European regions. Still, real estate outperformed equities in Europe in the first quarter. On a 12-month basis fund level performance outperformed both equities and bonds.”
The IPD Pan-Europe Property Funds Index tracks the performance of 14 funds, with a total value of approximately €16.8bn and NAV of about €12.3bn.
