MIPIM 2013: IPD reports poor recent returns from funds

The London-based data provider said property funds produced a -2 percent overall return to investors in the last quarter of 2012, although it also said a net €500 million has been raised to take advantage of European dislocation.

Data provider IPD has reported that the return from open-ended property funds in Europe was -2 percent in the last quarter of 2012.
The London-based firm, which collects data from all types of real estate funds, said at the MIPIM property show in Cannes, France today, that this was the third consecutive quarter of negative performance, comparing poorly with other asset classes, chiefly listed shares.

European equities posted a return of more than 15 percent for the year and real estate securities were almost twice as strong as the broader equity market, said IPD. The returns also are weaker than other real estate fund markets such as the US, which posted double-digit returns for 2012 as a whole.

IPD blamed “the wider Eurozone crisis” for the property funds’ downhill spiral. “Clearly these funds have been suffering from the wider Eurozone crisis, with returns being dragged down by value declines in the direct real estate market,” it said.

However, there was some good news, relatively speaking. Despite weaker 2012 performance, the pan-European fund sector has delivered more attractive returns over the medium term than the negative values witnessed recently. Over the past three years, returns have been lower than for equities and real estate securities but at a far lower volatility, it said.

One other bright spot to note was that the transparency provided by the index has helped the funds continue to attract capital, claimed IPD. “For some, it has enabled them to take advantage of the dislocations in the European real estate market.  During the final quarter of 2012, there was net investment of close to €500 million, with strongest flows to France and Germany and, for the first time in the history of the index, some divestment from the UK.”

IPD added: “By the end of 2012, the funds were well-positioned to take advantage of any improvement in the European real estate markets. Exposure is well-diversified across Europe, with greatest concentration on France and Germany that together comprise 50 percent of the index.  There also is relatively high exposure to the Benelux region as well as Central Europe, and low exposure to the Southern European countries of Italy, Portugal and Spain, as well as the UK and Nordics.”