Non-listed property funds with an added-value strategy have lost some of their appeal in the difficult market conditions dominating Europe. A survey conducted by the European Association of Investors in Non-Listed Real Estate Funds (INREV) indicates investors are leaning towards the safer haven of core funds.

Non-listed property funds with an added-value strategy have lost some of their appeal in the difficult market conditions dominating Europe. A survey conducted by the European Association of Investors in Non-Listed Real Estate Funds (INREV) indicates investors are leaning towards the safer haven of core funds.

INREV’s Investor Intentions survey 2009 - an annual survey polling investors, fund managers and fund of fund managers - shows that 37% now favour core funds, compared to 32% in the 2008 edition. The preference for value-added funds, which have a higher risk-return profile, has fallen 34 percentage points to 26%.

Only about 25% of the investors and 35% of fund managers questioned preferred value-added funds, according to the survey. As in the previous survey, fund of fund managers are the biggest supporter of a value-added style, with more than 50% support.

The core fund style is less appealing to fund of fund managers (just over 20%). In contrast, the style attracts almost 40% support among investors and almost 35% among fund managers.

However, the general shift from value-added to appetite for risk has disappeared entirely. Opportunity-style funds, with the highest risk-return profile, have remained popular in the last 12 months. The proportion of investors and fund managers favouring the style is constant at 37%.

The biggest turnaround since the 2008 survey is that two-thirds of respondents now favour blind pool funds to seeded structures. ‘This is likely to be due to reluctance by investors to take on properties in a market environment where values are still falling,’ INREV said.

All the groups’ surveyed expressed a strong preference for closed-end structures, similar to earlier surveys. And all groups preferred specialist to diversified funds and a majority of investors (52%) and fund mangers (76%) preferred single country funds.

Both investors and fund of fund managers are expecting to increase their allocation to funds of all three styles. More investors expect to increase their allocation to opportunity funds (50%) than core funds (36%). This may reflect that some investors have relatively opportunistic holdings.