Returns on unlisted UK real estate funds rose to 9% in 2013, their highest level in three years, according to the AREF/IPD UK Quarterly Property Funds Index.
Returns on unlisted UK real estate funds rose to 9% in 2013, their highest level in three years, according to the AREF/IPD UK Quarterly Property Funds Index.
Last year's performance marks a ‘significant improvement’ on the 1.1% delivered in 2012, IPD said.
Of the 49 funds measured, which are worth a combined £30.6 bn (€37.1 bn), three delivered a negative annual return in 2013, while 19 saw returns exceeding 10%.
By comparison, returns for bonds and equities for the year were -5.2% and 18.5% respectively, while returns for direct commercial property, as measured by the IPD UK Monthly Property Index, were 10.9%.
IPD said returns in the unlisted sector improved steadily throughout 2013, as growth in the wider economy fed through into the performance of underlying real estate. By the fourth quarter, returns were 4.1%, their highest since March 2010, boosting overall annual performance and marking 2013 firmly as a year of recovery.
Of the three fund types measured, long income property funds delivered the strongest annual performance, 10.3%, against the 8.5% of specialist and 9.1% of balanced funds.
John Cartwright, chief executive of AREF, said: ‘After a slow start to the year the performance of unlisted real estate bounced back in H2 as wider economic improvements filtered through into the performance of unlisted real estate returns.
‘Despite a wide spread in annual returns, there has nevertheless been a significant overall improvement in fund performance, and as growth continues to move out of the capital and prime hot spots, 2014 may well prove to be a strong year for the unlisted sector.’