Opportunistic fund performance down 13% in 12 months

The latest NCREIF/Townsend Real Estate Fund indices shows opportunistic funds down 12.3% in the three months to September, with value-added funds down 3%. In the year to September 2008, opportunity funds were off 13.1%.

Opportunistic real estate funds lost on average 13 percent in the year to September 2008, according to the latest indices from the National Council of Real Estate Investment Fiduciaries (NCREIF).

The NCREIF/Townsend fund indices, which tracks closed-ended value-added and opportunistic funds as well as core and open-ended property funds, revealed all opportunity fund returns were down 12.3 percent in the three months to September last year.

In the year to 30 September, 2008, opportunistic vehicles were down 13.1 percent. Value-added fund returns fared better, however, down 3 percent in the third quarter of last year, and up 0.6 percent in the year to September.

According to the index, opportunistic funds returned on average 25.4 percent in 2007, compared to 43.1 percent in 2006. The fund tracks 326 vehicles globally and comprises data from 124 opportunistic and value-added fund managers.  Together closed-ended value-added and opportunistic funds make up 89 percent of all funds measured.

As private equity real estate fund managers prepare year-end reports, many industry professionals are expecting a wave of write-downs as property prices continue to decline.

Senior managing director of Mesirow Financial Institutional Real Estate (MFIRE) Multi-Manager Strategies group Joshua Daitch said he expected “significant mark-downs” of around 15 percent in 2009 for underlying funds making up the NCREIF index. “When the public real estate market is down by roughly half then we have to ask how the private market is not down by similar amounts as well?” he told PERE this week.

The National Association of Real Estate Investment Trusts (NAREIT) All-REIT index shows the public real estate markets down 30 percent in October last year followed by a fall of 21 percent in November 2008.  The index rose 15 percent in December, but was followed by another fall of 15 percent in January 2009.