AREF: Pooled property funds outperform other asset classes in Q4

Pooled property funds (PPFs) in the UK outperformed other asset classes in the fourth quarter of 2007, according to research released by Association of Real Estate Funds (AREF).

Despite the slowdown in the UK property sector during the second quarter over £3.7 bn (EUR 4.9 bn) of new money was raised in the 12 months to December 2007 giving a net inflow into the sector of £200 mln for 2007. although redemptions came to 3.83% of net asset vale (£1.65bn) for the fourth quarter Q4 more than £400m (EUR 536 m) of new money was raised during the period.

AREF said the that over the 10 years to December 2007, PPFs delivered an annual total return of 12.4% compared with the 6.1% annual return from long term gilts, the 6.2% return from equities (FTSE All-Share Index) and the 8.2% return from real estate equities (FTSE Real Estate Equities). Within the property sector PPFs also exhibit a stronger risk adjusted return profile than both real estate equities and direct property holdings.

The report also highlighted the fact that a significant proportion of new money came from existing investors which demonstrates their confidence in the long term performance of PPFs. The report also said that the current market correction differs from that in the early 90’s in that it does not follow a development boom and comes in a low inflation and (relatively) low interest rate environment.

'While the market has experienced a sharp correction it is one that is unlikely to be prolonged. Indeed early anecdotal evidence from AREF members suggests outflows have reduced substantially with the first signs of inflows gaining momentum. The recent price correction coupled with a desire to hold real assets in times of turbulence has lead investors to invest once again in real estate funds.'