Record quarterly UK pooled fund double-digit returns, says IPD

British pooled property funds have delivered the first ever double-digit quarterly returns, at 10.4% in the IPD UK Pooled Property Fund Indices 20-year history.

The performance lifts the annual total returns for UK unlisted funds to -5.4% up from -32.0% in 2008. Although last year’s annual returns are still negative, the performance is the best for the fund sector in three years.

The IPD UK PPFI – sponsored by The Association of Real Estate Funds (AREF) and Linklaters – is comprised of 25 balanced and 35 specialist quarterly-valued funds, worth a combined net asset value of £22.5bn at the end of 2009. Balanced and specialist funds delivered 7.9% and 13.9% over the quarter and -1.8% and -9.8% over the year, respectively. Across the 60-strong fund constituents, every single fund delivered positive total return over the fourth quarter, while the returns spread over
the year was 91.6 percentage points; from -58.4% to +33.2%.

“The pooled fund total returns for 2009 reflect the dramatic reversal of fortunes in the underlying UK property market over the fourth quarter and, among other factors, the positive influence of leverage in rising markets. This is despite a reduction in the average debt used by PPFI constituents,” explains Cameron McVean, Head of Fund Services at IPD.

Over the final quarter of last year the three-month capital growth was 7.4%, according to the IPD UK Monthly Index, while the average gross loan-to-value ratios has fallen by almost five percentage points – from 29.8% at December 2008 to 24.1% at the end of last year.

Over the full calendar year, by comparison the direct property market recovered sufficient ground in the second half of the year to deliver annual total returns of 2.2%, as measured by the IPD UK Monthly Property Index. The wider equity market, as measured by the FTSE All-Share Index, staged a dramatic recovery to end the year at 30.1%, while property equities and bonds delivered 10.2% and
-0.3%, respectively.

Pooled funds returned -15.6% over three years, -2.7% over five years and 4.7% over the last decade.

source : IPD