Nordic property funds post negative euro return in Q3

Nordic property funds delivered a positive total return in local currency but a negative return in euros in the third quarter of 2013, according to IPD research.

The IPD Nordic Quarterly Property Fund Index showed a return of 0.5% in the third quarter of 2013, compared with 0.7% in the year-earlier period, measured in local currency.

The total return of 1.4% for the past 12 months is the lowest on record since early 2010, with a diminishing sequential performance throughout 2013. This is mainly due to the 12-month performance still being heavily impacted by a weak fourth quarter last year, of -0.6%.

The spread in quarterly returns between the 11 funds measured was 7 percentage points, with 8 funds delivering positive returns close to 3.5% at the high end, while three funds delivered negative returns at close to -3.5% as the lowest record.

When converted into euros, the index posted a negative return in both Q3 and the past 12 months, at -0.7% and -3.9% respectively, which reflects the volatility in foreign exchange rates over the same periods.

Håvard Bjorå, vice-president and deputy head of the Nordics at IPD, said, 'This is the first release of the index where we are able to present local currency returns alongside euro returns. Based on feedback by market participants this increases the relevance of the index and demonstrates IPD’s continuous commitment to increase transparency in the region.

'However, it is disappointing to see the weakening in performance in 2013 and over the last three years, both in local currency and euros. Furthermore, the wide discrepancies between local currencies and euro returns illustrate some of the challenges investors are facing in cross-border investments.'

The IPD Nordic Quarterly Property Fund Index is sponsored by EY and measures Net Asset Value (NAV) total returns from one valuation to the next. Aggregate gross assets for the funds add up to €5.1 bn at the end of the third quarter 2013, with an average loan-to-value of 47% and net assets of €2.7 bn.

Property allocation between contributors in the index shows Norway with 53%, Sweden and Finland close to 20%, and Denmark at 3%.