INREV index shows funds gaining momentum in Q4

The latest INREV Quarterly Index for Q4 2014 shows how European non-listed real estate funds continued to perform positively through 2014, with the index returning 2.44% in the quarter, a slight increase on the 2.31% in Q3

On an annualised four quarters rolling return basis, performance for European non-listed real estate funds was 8.90% - the highest in the history of the INREV Quarterly Index, which dates back to Q1 2010.

The main driver of performance in Q4 2014 is the income component, which was 1.29%. However, this is a seasonal trend, showing that more funds participating in the INREV Quarterly Index distribute capital in Q4 rather than any other quarter during the calendar year.

INREV says the strong performance of non-listed real estate funds can be explained in part by robust performance in the UK market, as well as improved conditions in continental Europe. While UK funds consistently outperform other countries with total return performance in Q4 2014 of 3.98% compared with 3.94% in Q3 2014, continental European funds achieved 1.37% in Q4 2014 which was a second positive quarter in 2014.

Large differences across continental Europe prevail. For example, southern European funds showed record high performance on an annualised four quarters rolling return basis in Q4 2014 of 12,68%, while central and eastern European funds continue to perform negatively. One year rolling annualised performance of value added funds returned 11.28% against core funds which returned 8.52%. This trend will also be seen in the INREV Annual Index 2014 that will be published in April 2015.

With a total return of 5.40%, industrial/logistics were the best performing sector over Q4 2014, followed by office at 3.68%, retail at 1.89% and residential at 1.67%.

As INREV also points out, large differences in historical performance values can be seen in some sub-indices due to small sample sizes. Additionally, an important aspect when looking at the performance of the INREV Quarterly Index in 2014 is the effect on performance of the newly launched INREV Guidelines on NAV calculations and the subsequent updated INREV NAV calculation methodology. These effects, which can be either negative or positive, can be seen in the funds that have applied INREV NAV calculation.