UK - Pension funds outperformed the International Property Databank's (IPD) benchmark of 3% for all participating UK funds in 2009, because they owned prime property and bought largely ahead of the market rally in the second half of the year.
Direct investments made by medium-sized life and pension funds - those with £250m-£1bn (€277m-€1.1bn) invested in real estate - outperformed the average rate of return for the IPD universe of funds last year by 7.2%, while small pension funds - with assets of under £250m - and large pension funds worth more than £1bn outperformed by 6.2% and 5.4%, respectively.
Malcolm Hunt, associate director at IPD, attributed three main reasons for their outperformance: their exposure to prime rather than secondary real estate assets; their exposure to retail warehousing rather than shopping centres; and their exposure to well-let properties.
However, there was a fourth factor: pension funds timed the market well in 2009, investing most of their capital during the first half of 2009, when prices were still falling.
IPD figures revealed today also showed that small and medium-sized pension funds increased their exposure to the UK market consistently during 2009, but most of their investments were made during the first three-quarters of the year, before tailing off in the final quarter.
Medium-sized pension funds made net investments of 3.9% during the nine-month period, while smaller pension funds made net investments of 1.7%. Net positive investments means pension funds bought more property than they sold.
This trend ran slightly counter to a broader investment trend, as most investments by funds in the IPD universe were made towards the latter part of 2009.
At the same time, however, larger pension funds were also net sellers during the same period, which might explain their inferior investment performance for 2009, as they posted net investments of -4% between Q1 and Q3 2009.
The UK's Investment Management Association (IMA) also confirmed most investors in UK real estate funds - both retail and institutional - made the biggest commitments towards the end of 2009.
IMA showed that the vast majority of capital inflows happened during the fourth quarter of the year, when £1.39bn was placed in real estate funds, versus only £422m in the third quarter and negative inflows during the first two quarters.
IPD also showed that pension funds still outperformed when exposure to indirect real estate investments - which caused a drag on performance due to the use of leverage - was taken into account.
Medium-sized pension funds outperformed the benchmark by 2.9% when indirect exposure was factored in, while small pension funds outperformed by 1.4%.
Large pension funds, which had the largest exposure to indirect investments at 22% versus an average holding of 10%, underperformed the IPD UK benchmark by 0.9%.