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28. Juni 2012 
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Nordic funds resilient in face of unravelling global market conditions
Unlisted real estate funds in the Nordic region showed a continuing performance revival in the first quarter of 2012, standing out as the top-ranking market of the regional fund groupings that IPD is able to track on a quarterly basis. The quarterly total return of 3.0% eclipsed those for the IPD Australian, German, UK and Pan-European fund indices, and represented a continuing revival after returns for the ten quarterly-valued Nordic funds went back into positive territory in the last quarter of 2011. This relatively healthy return has been bolstered by an improving income distribution yield, which now stands at 4.3% on annualised basis.
The IPD Nordic Quarterly Property Fund Index has proved relatively volatile, and in that respect has been similar to the UK funds index for most of the period since the Global Financial Crisis – though over recent quarters the UK index has by contrast followed a gradual downward trend. After a slight revival to 2.7% for Q4 2010, the UK funds’ return has followed an unerring decline to just 0.7% for the first quarter of 2012.
This level of return is now very similar to that registered by the IPD Pan-European Quarterly Fund Index – only available for the second time this quarter – and the German OFIX Index for open-ended funds primarily focused on the domestic market. But the long-term history of German fund performance is completely different, with a very consistent pattern of returns being delivered to investors quarter by quarter. The German-focused open-ended funds have not been affected by the heavy redemptions and forced closures that have hit some of the European and Globally-oriented German vehicles.
As one would expect, the IPD Pan-European Quarterly Fund Index has taken something of middle course in terms of its recent performance history, though the last quarter’s return actually sits at the bottom of the pack, reflecting the significant weighting in southern Europe of some of the constituent funds; it is here that the developing Eurozone crisis is being felt most keenly by property fund investors. Values on the underlying assets in these funds fell by 3.2% in Spain and 1.7% in Italy over the quarter; but values of French and German properties held by these vehicles also fell, showing that the wider economic slowdown is also starting to have a big impact on property fund returns.
The Mercer / IPD Australia Monthly Property Fund Index - Core Wholesale for Australia – just about as far away from Europe as a real estate fund investor can get – has meanwhile produced a reliable 2-3% per quarter over the last two years, following on from a more volatile period of performance. This group of 17 core wholesale funds has generated remarkably consistent annualised returns just shy of 10% through 2010-12, based on a healthy income distribution yield in excess of 6% per year.
Some signs of renewed diversification potential across global unlisted markets are thus beginning to emerge, and may become more pronounced as the Eurozone crisis unwinds. Quarterly returns are currently clustered within a narrow band, but this kind of pattern has tended to be exceptional historically. Forthcoming results for Q2 2012 will give a clearer indication of whether market differences are increasing – and will also allow comparison with half-yearly returns, including those for French unlisted funds.
The IPD Nordic Quarterly Property Fund Index has proved relatively volatile, and in that respect has been similar to the UK funds index for most of the period since the Global Financial Crisis – though over recent quarters the UK index has by contrast followed a gradual downward trend. After a slight revival to 2.7% for Q4 2010, the UK funds’ return has followed an unerring decline to just 0.7% for the first quarter of 2012.
This level of return is now very similar to that registered by the IPD Pan-European Quarterly Fund Index – only available for the second time this quarter – and the German OFIX Index for open-ended funds primarily focused on the domestic market. But the long-term history of German fund performance is completely different, with a very consistent pattern of returns being delivered to investors quarter by quarter. The German-focused open-ended funds have not been affected by the heavy redemptions and forced closures that have hit some of the European and Globally-oriented German vehicles.
As one would expect, the IPD Pan-European Quarterly Fund Index has taken something of middle course in terms of its recent performance history, though the last quarter’s return actually sits at the bottom of the pack, reflecting the significant weighting in southern Europe of some of the constituent funds; it is here that the developing Eurozone crisis is being felt most keenly by property fund investors. Values on the underlying assets in these funds fell by 3.2% in Spain and 1.7% in Italy over the quarter; but values of French and German properties held by these vehicles also fell, showing that the wider economic slowdown is also starting to have a big impact on property fund returns.
The Mercer / IPD Australia Monthly Property Fund Index - Core Wholesale for Australia – just about as far away from Europe as a real estate fund investor can get – has meanwhile produced a reliable 2-3% per quarter over the last two years, following on from a more volatile period of performance. This group of 17 core wholesale funds has generated remarkably consistent annualised returns just shy of 10% through 2010-12, based on a healthy income distribution yield in excess of 6% per year.
Some signs of renewed diversification potential across global unlisted markets are thus beginning to emerge, and may become more pronounced as the Eurozone crisis unwinds. Quarterly returns are currently clustered within a narrow band, but this kind of pattern has tended to be exceptional historically. Forthcoming results for Q2 2012 will give a clearer indication of whether market differences are increasing – and will also allow comparison with half-yearly returns, including those for French unlisted funds.
