Non-listed funds suffer drop in returns and capital raising

Non-listed real estate funds witnessed a significant drop in returns and the level of capital raised in 2011, according to new reports issued by the European sector organisation INREV.

Total returns fell to 3.7% in 2011 from 7.4% in 2010, according to the INREV Annual Index 2011. The amount of capital raised last year declined 9% drop, according to figures from the INREV Capital Raising Survey 2012. Both reports were released on Wednesday at INREV's annual conference in Vienna.

Core funds outperformed value added funds with total returns of 4.3% compared with 1.1% for value added funds. Similarly, the INREV Capital Raising Survey reflects a massive weighting toward core funds for which 86% of capital was raised, while opportunity and value added funds attracted only 8% and 6%, respectively.

The UK also reported a sharp drop in total returns from 14.9% to 5.7%. However, UK funds outperformed the rest of continental Europe - with the notable exception of France, which turned in 6.8%. The UK was also the most important source of capital in 2011 with investors committing EUR 2 bn, substantially more than their counterparts in Germany who committed EUR 1.3 bn.

The UK was the preferred destination for investor capital receiving 28% (or EUR 2.8 bn) of the total investments. In Germany, on the other hand, EUR 1.8 bn was invested.

'The headlines on performance and capital raised should come as no real surprise. We're facing turbulent and uncertain times. However, the news on the UK is clearly positive for those invested there,' said Casper Hesp, director research and market information, INREV.

Both reports show retail standing out as a sector. Though down from 11.7% in 2010, retail performed better than other sectors in 2011 with returns of 4.3%. It also attracted the lion’s share of capital from investors with 36% of all investments being made in this sector.