EUROPE - IPD has launched a new benchmark for pan-European funds it claims will boost investor confidence by making explicit differences in fund and asset-level performance.

The 16-fund index comprises open-ended funds with 490 assets under management totalling €11.2bn.

Up to now, differences between valuation regimes - notably, between German 'sustainable value' appraisals and the mark-to-market approach prevalent elsewhere - have made it difficult to compile an index of comparable funds and assets.

To qualify for the IPD Index - and, in a limited universe, most pan-European funds have - open-ended funds must undergo RICS-standard, quarterly, third-party appraisals.

They must also invest in at least three European regions and cap leveraged at 60%.

Dough Rowlands, head of multinational services at IPD, said: "Unlike the European property index [to be published at the end of this month], investors can use this as investible universe because it reflects a peer group of funds with a cross-border mandate."

The new benchmark reflects greater investor demand for diversified core exposure.
IPD data for 2011 show a continuing appetite for core, with 29% of investment in France, 19% in Germany and 12% in the UK.

Simon Mallinson, director of European research at Invesco Real Estate, pointed to the investor focus on income and liability-matching, with pan-European funds and REITs offering higher income than other forms of exposure.

"This is not the sexy end of the European real estate market - these aren't opportunistic funds, and they're not doing exotic debt deals," he said.

"These are funds delivering what investors want at the moment."

Describing the new benchmark as "the first investable pan-European index", Rowlands said simultaneous analysis of asset-level data would enable investors to measure fund layers and discrepancies between fund and asset performance.

The announcement of a pan-European benchmark coincided yesterday with the publication of data showing a continued recovery for cross-border European funds, which returned 4.1% in 2011 compared with underlying direct property market returns of 6.8%.

IPD attributed the positive return to geographic diversification driving greater long-term stability and lower exposure to volatile markets, including the UK.

"Our insights will enable better management of underlying assets," said Rowlands.

"The flow of information back to funds and visibility of the differences between funds will help our clients to manage their portfolios better."