UK - Specialist UK real estate funds returned 18.8% in 2010, outperforming rest of the market by 400 basis points, according to Investment Property Databank (IPD).
Balanced funds also delivered double-digit returns (12.2%), according to latest figures, but this was lower than the all pooled fund index average of 14.8%.
IPD analysts attributed the outperformance of specialist funds to a combination of factors: a structural bias in favour of parts of the market, which delivered better rates of return, in particular central London offices; strong individual asset performance within specific areas of the market, such as shopping centres; and the positive influence of leverage in rising markets.
Phil Tily, UK and Ireland managing director at IPD, said: "Around 40% of UK pooled funds matched or beat the performance of the underling property market in 2010, while a further 45% of funds delivered double-digit returns. So it was a strong year for UK unlisted funds.
"Those that outperformed owe their success to three factors: asset management, favourable structural bias and the positive influence of leverage."
Tily said there was a clear "trend toward de-leveraging across the board", with the gross loan-to-value ratio (LTV) for specialist funds recorded at 33.7% at the end of 2010.
Four of the seven sector-specific City office funds in the databank outperformed the PPFI specialist fund average by at least 3 percentage points, while five of the seven shopping centre-focused funds outperformed the PPFI specialist fund average.
The databank is comprised of 25 balanced and 34 specialist quarterly valued funds, worth a combined net asset value of £27.9bn (€32.7bn) at the end of 2010.
Balanced and specialist funds delivered 1.9% and 4% over the final quarter of 2010, while the all pooled fund average was 2.7%.
The average gross LTV ratio fell from 24.1% at December 2009 to 18.6% at the end of last year.
This is also more than 10 percentage points lower than two years ago when gross LTVs in the UK PPFI were 29.8%.
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