German Spezialfonds still outperforming inflation despite Q3 dip

In its latest Index reading, the European non-listed vehicles association INREV reports that its German Vehicles Quarterly Index for Q3 2018 recorded a slowdown in performance of German vehicles, with overall returns falling to 0.74% compared to 1.06% the previous quarter, bringing the 12-month rolling return to 4.02%.

The downturn was largely driven by slower capital growth at 0.37%, dropping off from 0.50% in Q2 and 1.01% in Q1 2018.

Despite that, INREV says that the Spezialfonds sector remains solidly robust. It has tripled in size over the past eight years and has persistently outperformed German inflation, with an average quarterly performance of 0.91% from Q2 2000 to Q2 2018, almost triple that of inflation at 0.36%.

Spezialfonds significantly outperformed Publikumsfonds (open-ended mutual funds) in Q3, with a total quarterly return of 1.53%, compared to 0.31% for Publikumfonds. Over 12 months this equates to 7.69% and 2.12%, respectively, marking a substantial gap between the two vehicle types and reinforcing the dominance of Spezialfonds, which have consistently outperformed Publikumsfonds since 2014.

Fund vehicles targeting Germany remained strong, says the report. Vehicles targeting Germany performed reasonably well in Q3, delivering 1.90% – only marginally down from the 2.00% total return achieved in Q2. Conversely, vehicles with a global strategy were less successful, slowing from 0.73% in Q2 to a total return of 0.04%.

Henri Vuong, INREV’s Director of Research and Market Information, said: ‘While reasonably significant, the quarterly fall in performance may say more about a fairly typical drop-off at this point in the year than anything more sinister. The 12-month rolling return of 4.02% is a more accurate indicator of the underlying strength of the German non-listed real estate market. The ongoing strong performance of Spezialfonds shows that they could be an attractive option for institutional investors who are looking to improve their returns in periods of increasing inflation.’