Property funds suffered their worst year on record, with £6.5 outflows for every £100 invested in 2019, according to new analysis from Calastone - the largest global funds network.
And they have been worst performing, as for 2019 real estate alone saw net outflows of capital, among the main four asset classes.
'Property funds are suffering from the tension between their illiquid asset bases and their open-ended structure,' said Edward Glyn, head of Global Markets at Calastone.
For the full year in 2019, investors withdrew a record net £2.2 bn, with December 2019 marking a record 15th consecutive month of outflows. This has been the largest and most sustained outflow of capital on record and it led to the high-profile suspension of trading in one large fund in December. That event predictably spurred even faster outflows from the rest of the peer group.
The FFI: Real Estate measured just 34.3 for the full year, its worst on record. Moreover, the outflows are very large compared to assets under management. During 2019 alone, more than £6.48 in every £100 invested was withdrawn, an unprecedented level for such a well-established sector. The outflow pressure is forcing fund managers to maintain very high levels of cash, diluting returns for investors.
Only the niche fund categories of absolute return and alternatives, both flavour of the month with investors between 2015 and 2017, saw worse outflows in relative terms than real estate, shedding a punishing one twelfth and one eighth of their respective assets under management.
