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RE fund returns pick up in Q1 2009

While still posting negative returns, the latest quarterly update by the National Council of Real Estate Investment Fiduciaries (NCREIF) and The Townsend Group shows a slight pick-up in returns for opportunity and value-added real estate funds managed by US firms in the first quarter of 2009.

Returns across opportunistic and value-added real estate fund strategies adopted by US funds improved slightly in the first quarter of 2009 on the fourth quarter of last year, according to the latest research by the National Council of Real Estate Investment Fiduciaries (NCREIF) and The Townsend Group.
 
In their joint Real Estate Fund Indices and Vintage Period Performance Report First Quarter 2009 report, Chicago-based NCREIF and Cleveland-based Townsend Group recorded time-weighted index returns for opportunity funds in the first quarter of the year of -14.8 percent, up markedly on the -26.2 percent return recorded in the previous quarter.
 
Value-added funds provided better returns too, albeit at a smaller margin. Value-added funds returned  -15.3 percent, up 2 percent on the fourth quarter of 2008. Within that strategy, closed-ended value –added funds returns outshone those in open-ended structures returning -8 percent compared with -22.3 percent the quarter before.
 
Both strategies remain on course to provide negative annual returns for the second year running, after 2008 brought a string of positive returns to halt, with opportunity funds returning -36.4 percent and value-added funds returning -19.4 percent. Prior to 2008, both strategies consistently outperformed their comparative return targets of 20 percent for opportunity funds and 15 percent for value-added funds. At their peak in 2005, opportunity funds returned 44.5 percent while value-added funds returned 27.5 percent.
 
The research by NECREIF, which was formed in 1982, and The Townsend Group spans more than 600 PERE funds worldwide but which are managed by US managers, including core funds. It comprises both active, equivalent to approximately 300 funds and more than $350 billion of equity, and fully invested funds across the strategies.