GLOBAL - Cross-border property funds and deals are showing increased levels of activity in Europe in spite of the current market slump.

Cross-border European property funds recorded a fifth consecutive quarter of positive returns, delivering 1.2%, according to the IPD Pan-European Pooled Funds index.

Nassos Manginas, director of global client services at IPD, said: "Reliable income returns across the portfolios have kept overall returns positive, despite values suffering due to the general uncertainty concerning the euro-zone.

"Specialist funds, which outperformed balanced funds for the second consecutive quarter, almost entirely due to their income streams, maintained an income return of 1.5%, while balanced funds recorded 0.7%."

Manginas said the effects of gearing and cash holdings in the portfolios had also been mixed.

"Since the unexpectedly low euro-zone inflation figures - around 2.5% - for the second quarter, it is unlikely the European Central Bank will raise interest rates, already at 1.5%.

"This has had a positive effect on the considerably higher leveraged specialist portfolios - specialist funds have an average gearing to GAV of 42.4%, while balanced funds 30.6% - while the larger cash holdings of the balanced portfolios have acted as a drag."

European cross-border funds recorded positive quarterly growth in the second quarter of 2010 for the first time after nine consecutive months of negative return.

Meanwhile, a study published by Real Capital Analytics shows that global cross-border transactions have continued apace, led by Central and Eastern Europe (CEE).

The region accounted for 72% of all acquisitions year to date from 35% for all of 2010.

In total this year both closed and in-contract transactions in CEE came to more than $12.4bn (€8.8bn).

Other regions have also recorded a high level of activity, with cross-border investment in Latin America - mostly Brazil - more than doubling to 34% this year.

However, in Europe, cross-border investment rose, but at a much slower rate than in CEE, and mostly on the strength in Germany and the Nordics.

Topics