UK pooled funds perform strongly: Aref

The Association of Real Estate Funds (AREF)'s Investment Quarterly (IQ) for Q3 2010 today reveals a net asset value of £31.5 bn (EUR 37 bn) for UK unlisted pooled property funds (PPFs), up £10 bn on this time last year. Excellent performance and significant net inflows account for this increased net asset value. The Investment Quarterly examines trends in the UK unlisted pooled property funds (PPFs) industry through data provided by 68 member funds.

In Q3 2010, PPFs raised £752 mln of new money, slightly below the three year average of around £885 mln. Money raised from new investors was broadly in line with that raised from existing investors in Quarter 3 2010. Net flows were £400 mln this quarter, bringing the total for the last 12 months to £5.7 bn. The latest figures indicate a continuing reduction of net flows throughout 2010 but still a positive, albeit modest, overall picture.

The All-pooled property fund index saw a positive total return of 2.0% in Q3 2010, down from 3.4% in the previous quarter. Although this is lowest quarterly index return yet in 2010, it is the fifth consecutive quarter of positive returns following the two years of negative performance and is more in line with long run expectations for the asset class. During the 12 months to September 2010, PPFs delivered a positive return of 23.4% and over 10 years an annualised return of 4.9%.

The weighted average PPF yield was 4.21% in Q3 2010, down slightly from 4.32% in the previous quarter.

Looking at retail investment in pooled property funds, the net asset value of Authorised Property Unit Trusts (APUTs) reached £8.2 bn in Quarter 3 2010, back to the levels last seen in 2007. The new capital raised by retail investors was £365 mln in Quarter 3 2010, half that invested in the previous quarter and below the three year average figure of £454 mln.

Commenting on the latest IQ, John Cartwright, AREF CEO, said: 'Quarter 3's figures indicate moderation in new investment. Nonetheless, continuing net inflows signal retail and institutional investors’ positive endorsement of the asset class and its attractive income characteristics, when the outlook for the wider economy is uncertain. Our statistics suggest a return to ‘normality,’ following the unsustainable return levels of earlier this year.'