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Unlisted Property in the UK Stable but Returns Dwindling

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United Kingdom  IPD  Malcolm Hunt  John Cartwright  Property Fund Performance 

Unlisted Property in the UK Stable but Returns Dwindling

By - Wednesday 25 April 2012

Unlisted property funds in the UK returned just 0.7% in the first quarter according to the latest AREF/IPD UK Property Fund Index. This is the lowest returned since the market entered recovery in Q3 2009 according to the report. The report shows that the return was saved by stable income returns of 80 basis points, which made up for a 10bps reduction in Net Asset Values over the quarter. Conversely, specialist funds primarily operating in more challenged markets segments saw Net Asset Values grow 13 bps while capital fell 0.5%.

According to Malcolm Hunt, IPD Director of Client Services said of the data, all but four of the 27 balanced property funds continued to deliver positive total returns this quarter, as did two thirds of all specialist funds.

But Hunt also revealed that the listed property sector well outperformed the listed sector with returns of 11%, partially supported by the strong performance of the broader equity market at 6.1%. Meanwhile unlisted property still performed better than bonds, which returned a negative 0.3% on the quarter.

“Over a 12-month period those performance rankings are neatly reversed, with bonds generating a staggering 16.1%, unlisted property a healthy 5.4%, equities 1.4% and property equities -4.4%,” said Hunt.

John Cartwright at AREF stated “A fall in values has meant gearing for specialist funds has increased for the first time in three years (as a % of GAV). Gearing levels overall for specialist funds had previously dropped from 47% to 32%, off the back of the market recovery and managers actively reducing their debt level exposures.

“Across the balanced funds gearing remains at an all-time low, just 2.6% of GAV, having a negligible impact on overall performance levels. On the flip-side, over-all cash holdings continued to have dampening effect on fund performance numbers in the current low interest rate environment.”

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