Performance in European non-listed funds slows in Q3 - INREV

European non-listed real estate funds continue to deliver positive performance in the third quarter of 2015 albeit at a slower pace than the previous quarter, according to the results of the INREV Quarterly Index for Q3 2015.

The index returned 2.27% in Q3 2015 compared with 2.60% in Q2 2015. On an annualised four quarters rolling return basis performance for non-listed funds was 9.37%, which is among the highest in the history of the INREV Quarterly Index since its inception in Q1 2010. The main driver of performance in Q3 2015 was the capital growth component, which was 1.45% compared with a modest 0.82% for income return.

The slowdown in Q3 performance was seen across both core and value added funds. Performance of core funds decreased slightly to 2.16% for the quarter compared with 2.35% previously, while value added funds returned 3.12% for Q3 2015, down from 4.50% previously.

Conversely positive performance can be explained in part by the performance of Dutch funds, which achieved returns of 3.24% for Q3 compared to 1.51% for Q2 2015. This is largely attributable to strong positive performance from funds investing in the residential sector. The positive momentum was echoed in Germany, where funds returned 1.93% up from 1.07% in Q2. Meanwhile the UK market delivered a return of 2.74% for Q3 2015, compared with 3.38% previously.

Southern European funds delivered 6.60% in Q3 2015, a big pick up compared to the 2.74% seen in Q2 2015. Western European funds performed 2.53% for this quarter, compared to 2.68% previously. With a total return of 3.57%, industrial / logistics was the best performing sector for Q3 2015, followed by residential at 3.48%, office at 2.58% and retail at 1.94%.

Commenting on the key take-home message of the third-quarter figures, INREV's director of research Henri Vuong said, “Despite a slight slowdown in performance in comparison to Q2, the Q3 results show that the non-listed real estate sector continues to perform strongly. Southern Europe is an interesting story. There has been growing investor appetite for this region, especially from the US, and these performance figures support the prospect of further investment in this region.”