The unprecedented 100 percentage point spread of performance within the European unlisted real estate property fund market in 2008 reflected the geography of investment returns, the impacts of leverage, and a further penalty for some investors of adverse currency movements, research based on the new IPD European fund indices reveals.
According to the inaugural bi-annual IPD European Pooled Property Fund Indices 2008 (e-PPFI) – reporting the NAV based total return performance of 203 predominantly core and value-added funds representing a total NAV of 121 billion euros – European unlisted pooled funds delivered a local currency time-weighted total return of -7.4%, which translated to a -14.8% return to Euro denominated investors, each of whom suffered the added pain of a major fall in the sterling-euro cross rates.
Both of these figures, however, mask a much more complex set of competing influences. Across the database, performance varied dramatically – from -80% to +25%, in local currencies. The pattern of fund performance, either side of the -7.4% value weighted average, is almost entirely explained by the geography of investments, with UK pooled funds falling to the left of this average and mainland Continental funds to the right, as indicated in the fund ranking graph shown above.
The reported six-monthly Indices numbers are constructed on the same basis as for all other fund indices published by IPD, and demonstrate the imbalance between the two halves of 2008 – with most of the decline experienced in the second half year.
By comparison with other investments, European pooled funds outperformed European equities and property equities which both delivered deeply negative returns at -38.5% and -48.6% respectively, according to the MSCI Europe and the FTSE EPRA/ NAREIT indices. However, unlisted European property funds underperformed European bonds, which returned 7.7% over 2008.
The full picture of direct property performance at a European scale will be released on May 11th 2009 in the IPD Pan-European property index.
source : IPD
via European pooled funds suffer both market and leverage woes, says IPD.
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