European funds turn negative in 4Q12 – INREV

Total returns by European non-listed property funds turned negative in the fourth quarter, mainly due to a decline in performance in continental Europe, says funds association INREV. Funds posted a negative return of 0.6% after a 0.3% positive return in 3Q12.

Capital growth was negative for the sixth quarter in a row, according to INREV’s Quarterly Index, which covers 254 participating funds. Continental European funds suffered a 1.0% negative return after a positive 0.4%, mainly due to a weakness of multi-country funds, which returned a negative 2.2%. Finland delivered the strongest total returns at 4.2%, with the Netherlands and UK also showing positive performances, while France, Germany and Italy recorded negative results. Core funds continued to outperform value added vehicles.

“The positive momentum of the previous quarter did not last into 4Q12 as total returns for all funds dropped significantly,” commented research director Casper Hesp. “The drop in growth can be related to the negative performance of value added funds. In general these funds have higher gearing ratios compared to core funds.” Funds with leverage of up to 40% strongly outperformed those with 60%-100% leverage, which reported a negative return of 7.9%. “However, according to our recent Investment Intentions Survey, investors are likely to take more risk and switch allocations to value added funds in 2013 so it will be interesting to see if this changes performance in 2013.”