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29. Mai 2012 
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Weakening of the IPD European fund indices in 2011
IPD brings together some key findings from the latest results of IPD’s European unlisted fund indices’ with the continent starting to see currency upheavals hitting the recovery which had emerged in the previous two years. The Eurozone crisis started to take its toll on European unlisted property funds in 2011, with returns falling from their 2010 level for each of IPD’s national fund market indices, with the exception of Germany – where performance was little changed from the previous year.
As in 2011, funds in the Nordic region, France and the UK produced the higher returns, in the region of 5-10%, while those in Germany, Portugal and Italy on balance provided little more than the annual distribution yield to their investors – indeed Italian fund performance turned negative for the first time in the index’s 11-year history. Meanwhile the Pan-European Property Funds Index, newly launched earlier this year, took up a predictable position in the middle of the performance spectrum; this index measures the returns from funds investing internationally across the continent, while the other indices are restricted to vehicles which invest predominantly in their home markets. The chart also shows the performance of all European funds tracked by IPD, which covers many other European countries apart from the six individual geographies listed. This All European Property Fund indicator encompasses vehicles with a total NAV of €140bn, the largest sample of unlisted fund data for Europe currently in existence.
The degree of recent convergence in European fund markets is remarkable set against the wide range of returns seen immediately after of the Global Financial Crisis, and the differences in fund structure and strategy across markets. IPD’s fund indices are based on changes in NAV (net asset value) and thus give a true reflection of the returns delivered to their investors, taking into account the impact of leverage and fees – which can differ significantly from the performance of underlying property assets. Average leverage levels range from 15% for funds in the Portuguese Pooled Property Funds Index to 48% in the Nordic index, but in most places the debt ratio has been coming down over the past two or three years as property values have stabilised and recovered.
Andrew Smith, Global Head of Property at Aberdeen, sees the maturing of IPD’s unlisted fund indices as an important development for the industry. “The landscape for measuring performance is changing,” he comments, “with increasing emphasis on the analysis of pooled funds, and in particular being able to relate fund-level NAV-based performance to the returns on the underlying properties; IPD’s national and Pan-European fund data is increasingly useful in that context. It’s a struggle to raise capital for these kinds of vehicle at present, with ever greater due diligence being demanded by investors; the trend is towards stronger governance and alignment of interest, coupled with lower risk and less complex financial engineering. In this regard, linking the fund performance to that of direct markets is essential.”
As in 2011, funds in the Nordic region, France and the UK produced the higher returns, in the region of 5-10%, while those in Germany, Portugal and Italy on balance provided little more than the annual distribution yield to their investors – indeed Italian fund performance turned negative for the first time in the index’s 11-year history. Meanwhile the Pan-European Property Funds Index, newly launched earlier this year, took up a predictable position in the middle of the performance spectrum; this index measures the returns from funds investing internationally across the continent, while the other indices are restricted to vehicles which invest predominantly in their home markets. The chart also shows the performance of all European funds tracked by IPD, which covers many other European countries apart from the six individual geographies listed. This All European Property Fund indicator encompasses vehicles with a total NAV of €140bn, the largest sample of unlisted fund data for Europe currently in existence.
The degree of recent convergence in European fund markets is remarkable set against the wide range of returns seen immediately after of the Global Financial Crisis, and the differences in fund structure and strategy across markets. IPD’s fund indices are based on changes in NAV (net asset value) and thus give a true reflection of the returns delivered to their investors, taking into account the impact of leverage and fees – which can differ significantly from the performance of underlying property assets. Average leverage levels range from 15% for funds in the Portuguese Pooled Property Funds Index to 48% in the Nordic index, but in most places the debt ratio has been coming down over the past two or three years as property values have stabilised and recovered.
Andrew Smith, Global Head of Property at Aberdeen, sees the maturing of IPD’s unlisted fund indices as an important development for the industry. “The landscape for measuring performance is changing,” he comments, “with increasing emphasis on the analysis of pooled funds, and in particular being able to relate fund-level NAV-based performance to the returns on the underlying properties; IPD’s national and Pan-European fund data is increasingly useful in that context. It’s a struggle to raise capital for these kinds of vehicle at present, with ever greater due diligence being demanded by investors; the trend is towards stronger governance and alignment of interest, coupled with lower risk and less complex financial engineering. In this regard, linking the fund performance to that of direct markets is essential.”
